Cash Market Trading or Future Market Trading. Which is Best?

CASH MARKET Vs FUTURE MARKET

Cash Market Trading or Future Market Trading. Which is Best? :

Introduction :
In this article we are going to discuss, understand and learn about the Cash Market and Future Market Trading. What is Cash Market & Future Market Trading? Comparison of Cash Market Trading and Future Market Trading?

What is Cash Market Trading?
In Cash Market Trading we give cash and get equivalent value of stocks. This stocks can be hold upto the time we want to keep on holding these stock. In Cash market dealing we get benefits by price appreciation and by dividend payouts. Sometimes we get benefit of Split and bonuses also in few cases. But here we have one issue to engage more money by paying full amount of stock price if we purchase same amount as lot of future.
For example:
If we buy one lot (Qty - 5000 nos) of stock @ $100 in cash market then we have to pay
5000 * 100 = $ 50,00,000.

What is Future Market Trading?
In Future Market Trading we give cash but in equivalent of that we get 3 month contract only. And at the end of 3rd month the contract expires and we have to settle our trade by clearing position by accepting profit or loss in trade in term of money. There is no benefit of dividend, split and bonus in Future market trading. Here we have one benefit that we only have to engage only 20% to 30% of cost of lot but the price appreciation benefit is same.
For example:
If we buy one lot (Qty - 5000 nos) of stock @ $100 in Future market then we have to pay
5000 * 100 * 30% = $ 1,50,000.

For More Knowledge on Cash and Future Market. Click Here!

Comparison of Cash Market Trading and Future Market Trading? which is Best?
Very Interesting! Let's go,
From above discussion you already understood the benefit and drawback of both type of tradings.
Now we have to understand their way of working, to get best out of Cash Market and Future Market Trading.
Suppose we have to move from one place A to other place B, which is around 2000 KM away from each other.
For covering this distance we can use several way of transportation.
Like Walking, Bicycle, Motor Bike, 4 wheeler, Train, Aeroplane and also with fastest available vehicle Fighter Plane etc.
So we consider two way of transportation for our Cash and Future Market Trading comparison.
For Cash Market Trading we assume like we are travelling by Train and for Future Market Trading we assume like we are travelling by Fighter Plane.
Train having max speed of 160 Km/Hr and Fighter Plane having max speed of more than 2000 Km/Hr.

Cash Market Trading comparison :
As in Train to cover 2000 Km we require around 12.5 hrs, if we continue to run at the speed of 160 Km/hr max. Hence we book birth to travel 12.5 hrs in train and having a sleep.
Similar way Cash Market Trading is also a mode which is fast and help to reach on our financial target faster than other slow conservative mode like FD & PF etc.
Time required is more in train as comparison of Fighter plane but it is also fast and reliable in long term as we can sleep in train here also in Cash Market Trading we can have a relax life, if invested properly by doing proper analysis on investing stock Fundamentally and Technically but result will take some time.

For More Knowledge on Fundamental and Technical Analysis. Click Here!

Future Market Trading comparison :
Now the case of Future Market Trading is just like travelling by Fighter plane.
It is faster, full of thrill and required utmost passion and precision.
In one Fighter plane one or two person can go and hence need to take care of ourself.
We can reach our destination of 2000 Km in just 1 hrs as the speed of Fighter Plane is more than 2000 Km/ Hrs.
But we can't take a sleep in Fighter plane, as in Fighter plane we have to keep ready to fight and remain safe from others.
Similar way in Future Market Trading is fastest way to reach our financial goal target than other way of investment with less amount of investment by rolling of available money .
Though it is fastest but we can't remove our eye from running trade.
Safety is a major concern.
Abnormal movement of market in opposite direction can cause huge loss, if not able to do roll over for few months.
Also path of Fighter plane need to be predefined.
Similar way we need to design suitable strategy to trade in Future Market Trading in advance.
Future Market Trading is short span trade and need to take fast decisions to avoid loss.


Conclusion :
Both Cash Market Trading and Future Market Trading have there own Pros and Cons. One is slow and safe other is fast and not so safe. As for all conservative investor FD, PF are the suitable instrument, for moderate type investor Cash market trading is suitable instrument and for aggressive type trader Future Market Trading is suitable instrument. According to ones ability to take risk we have to decide our way of Market trading in Cash or Future segment.

Hope Friend you have got lot of clarity from above discussion. All the best.

Disclaimer : This article is only for knowledge and information sharing and not for any type of recommendation.