Advantages of trading in NIFTY
Modern day economics evinces that Nifty has progressed significantly since its inception. For those of you who are new to this, Nifty stands for National Stock Exchange Fifty, or more commonly called as Nifty. In layman terms, it simply is the market indicator for NSE (National Stock Exchange).
Nifty ideally is a collection of 50 stocks. Currently, however, that number has upped one and now is a collection of 51 listed in it. Some also refer to Nifty as Nifty 50 or CNX Nifty. These terminologies are important to know so that you do not assume them to be variations of Nifty. Essentially, the ones mentioned thus far all mean the same.
Now that we know and understand the index slightly better than what we used to prior to this, let us now look into the advantages of trading in Nifty.
Nifty 50 index is something that ensures diversification. This is because it consists of 50 stocks which represent more than 10 sectors. Considering that your view regarding stocks can never really be 100%, this diversification provides stability, thereby protecting you when your view goes slightly off-track. Diversification also ends up giving you the bigger picture of the market in both near and long-term.
In stocks, predictability is hard to come by. But when you invest in Nifty, tracking and predicting moves is easier as compared to stocks. This is because in Nifty, you only have to focus on the Technical Analysis.
When it comes to Nifty Futures, the margin required is only 8%. This is far less than the average stock futures margin of 13% to take positions in it.
It comes as a benefit to those who trade in Nifty Futures as there is enough liquidity in far-month contracts as compared to stock futures. This makes it easier to take a positional view of buying mid-month Nifty contracts and also far month Nifty contracts.
Basically, spread means the bid-ask difference. It essentially is the price difference which the buyers and sellers quote. This is important for traders who use scalping strategies to trade. The lower the difference is the better will be the experience. Trading with Nifty futures ensures lower spreads because the bid-ask difference is relatively better, thereby giving you a better price to either buy or sell.
Since Nifty ensures high liquidity, it gets easier for you to research and take a well-analysed call about trading decisions. It allows you to study out-of-the-money and in-the-money strike price and at the same time hedges against your long and short positions.
People usually are apprehensive when it comes to trading with the NSE. It is all a matter of knowing what and where you would have it safe. And safety is a surety that comes with trading in Nifty. The benefits of trading in Nifty are more than what we have listed and the only way to know more about them is by getting involved.