Taiwan Futures Trading Introduction: How to Choose Between Large and Small Contracts? Small Contract Near Full Quote Inquiry Guide

If you are considering entering futures trading, Taiwan stock index futures should be on your shortlist. Compared to other investment tools, Taiwan index futures offer some unique advantages: you can profit in both rising and falling markets, control larger positions with less capital through leverage, and enjoy trading hours up to 19 hours, far longer than the stock market trading sessions.

Most importantly, trading costs are low. Compared to directly investing in stocks, the commission fees for futures trading may only account for 0.01% of the actual investment amount. These advantages have attracted more and more investors to focus on the Taiwan index futures market.

What is Taiwan Index Futures? Understand the core concept in three sentences

Taiwan index futures are futures contracts that track the movement of the Taiwan Weighted Index. When you buy Taiwan index futures, you are betting that the index will rise; conversely, if you sell, you are betting it will fall. This is a tool that can be used for speculative profits or to hedge stock portfolio risks.

Suppose the weighted index is now at 15,600 points. If you buy one lot of the Taiwan index futures, what is the actual investment amount behind it? Simple: 15,600 points × 200 NTD/point = 3,120,000 NTD. This is called the “nominal value.” But you don’t need to put up this entire amount in cash—just deposit margin, which is usually only a small fraction of the actual investment.

Taiwan index futures were officially launched in 1998, operated by the Taiwan Futures Exchange(TAIFEX), and are currently the most actively traded index futures in Taiwan. Since then, Singapore Exchange and Hong Kong Exchanges have also launched their own Taiwan index futures products, but their trading volumes are far less than those of TAIFEX’s contracts.

What are the differences between Large and Small Taiwan Index Futures? Know before choosing

TAIFEX offers two specifications of Taiwan index futures contracts: Large Taiwan Index(TX) and Small Taiwan Index(MTX). Both track the same index, but differ in contract multiplier:

• Large Taiwan Index: 1 point = 200 NTD
• Small Taiwan Index: 1 point = 50 NTD

For example, with an index of 15,600 points, one large lot contract is worth 3,120,000 NTD, while one small lot contract is worth 780,000 NTD. The contract value of the large index is four times that of the small index, so the margin requirement is also four times higher.

Specific margin requirements are as follows:

• Large Taiwan Index: Initial margin 184,000 NTD, Maintenance margin 141,000 NTD
• Small Taiwan Index: Initial margin 46,000 NTD, Maintenance margin 35,250 NTD

Both have identical trading hours—generally from 8:45 AM to 1:45 PM, with after-hours trading from 3:00 PM to 5:00 AM the next day. Expiry is on the third Wednesday of the contract month.

For beginners, small Taiwan index futures are a better choice because they require less capital and carry relatively lower risk. As experience grows, you can consider trading the large index futures.

Want to trade Taiwan index futures? Pass these four hurdles first

First hurdle: Opening an account

To trade Taiwan index futures, you must first open an account with a futures broker. The basic requirement is being at least 20 years old. Nowadays, most brokers support online account opening, making the process very convenient.

Second hurdle: Deposit margin

After opening an account, you need to deposit the appropriate margin based on the contract specifications you plan to trade. If trading small index futures, at least 46,000 NTD (initial margin); for large index futures, 184,000 NTD.

Many beginners make a critical mistake—they think the deposited margin is their actual risk exposure. Absolutely not! The real risk is based on the nominal value of the contract, not the margin. For example, controlling a position with 46,000 NTD margin in a contract with a nominal value of 780,000 NTD (small index futures) results in a leverage of 17 times.

Third hurdle: Placing orders

Log into the trading platform, select the Taiwan index futures contract you want to trade. An order entry screen will appear. You need to choose:

• Order type: For most investors, “ROD (Rest-of-day)” is sufficient, meaning the order is valid until the end of the trading day.
• Number of lots: Decide how many contracts to buy or sell
• Price: Enter your target transaction price
• Direction: Choose buy (long) or sell (short)

If you already hold a position, the system will automatically determine whether your new order is to close or add to your position.

Fourth hurdle: Monitoring positions and closing

After placing an order, your account value will fluctuate with market movements—this is called “mark-to-market.” You need to monitor your account balance constantly to ensure it remains above the maintenance margin.

If your account value falls below the maintenance margin, you must deposit additional funds immediately; otherwise, your broker will automatically close your position—called a “margin call” or “liquidation,” which can lead to significant losses.

Closing a position is simple: just execute an opposite trade—sell the same number of contracts if you bought, or buy if you sold.

How to understand Taiwan index futures profit and loss with one table

Suppose you deposit 400,000 NTD as margin to trade 2 lots of large Taiwan index futures at a price of 15,600 points.

If the index rises 400 points to 16,000:

• Long position profit: (16,000 - 15,600) × 200 × 2 = 80,000 NTD
• Account balance becomes: 400,000 + 80,000 = 480,000 NTD
• Short position loss: 80,000 NTD
• Account balance becomes: 400,000 - 80,000 = 320,000 NTD

If the index falls 400 points to 15,200:

• Long position loss: 80,000 NTD, account balance: 320,000 NTD
• Short position profit: 80,000 NTD, account balance: 480,000 NTD

What does this tell us? If you bet correctly, the returns are substantial; if wrong, losses can be rapid.

How to check real-time quotes for Taiwan index futures?

When you open the trading platform’s quote interface, you’ll see prices for various contract months. The nearest expiry contracts have the highest liquidity and are most suitable for trading.

To view the latest month’s quotes, look for options labeled with “Near” (e.g., “Taiwan Index Near” or “Small Taiwan Index Near”). This indicates the contract is approaching expiry.

But what are “Small Index Near Full” or “Taiwan Index Near Full”? The “Full” indicates the quote includes complete data for both trading sessions—daytime trading and after-hours trading. If you want to see after-hours prices or trade during the after-hours session, look for contracts with “Full” in their name.

Besides the trading platform, you can also visit the official Taiwan Futures Exchange website for real-time quotes.

Essential technical analysis tools for short-term trading

Taiwan index futures are mainly used for short-term trading; few investors hold long-term positions. The main technical analysis tools fall into three categories.

First: Moving Averages

Most commonly used are the 50-day simple moving average (SMA), 200-day SMA, and 20-day exponential moving average (EMA). Trend judgment is straightforward:

• If the index futures are above these moving averages and the lines are sloping upward, the trend is bullish.
• If the 50-day SMA crosses above the 200-day SMA from below, it’s a bullish signal.
• Conversely, the opposite indicates a bearish trend.

Second: Momentum Indicators

These measure the speed and magnitude of price changes. The most famous are RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence).

RSI helps identify “divergence” phenomena. For example, if the price makes a new low but RSI does not, it’s called “bullish divergence,” often signaling a potential reversal upward. The opposite is “bearish divergence.”

MACD consists of two lines (MACD line and signal line) and a histogram. Basic signals include:

• MACD line crossing above the signal line = bullish signal (buy)
• MACD line crossing below the signal line = bearish signal (sell)
• MACD crossing above zero = bullish momentum
• MACD crossing below zero = bearish momentum

Third: Chart Patterns

Common patterns include head and shoulders, double tops/bottoms, ascending/descending triangles, wedges, and cup-and-handle formations. For example, an ascending wedge is often seen as a bearish pattern—traders wait for a breakdown below the lower trendline to sell. If the price breaks above the upper trendline, the pattern is invalidated, and bullish momentum may resume.

How to choose the expiry month for Taiwan index futures?

Each futures contract has an expiry date. When it expires, all open positions are automatically settled. To maintain a position continuously, you need to “roll over” the contract.

The process is: close the expiring near-month contract(near) and simultaneously open a new position in a later-month contract(far). To avoid risks during price fluctuations, the best approach is to use “spread orders” to execute both trades simultaneously.

In spread orders, you specify the difference between two contracts, not the futures price itself. If the far-month contract is trading at a discount (negative spread) relative to the near-month, you will pay this spread when rolling over long positions.

Note that rolling over can be done anytime, not just near expiry. Doing it early can also help avoid liquidity risks close to expiry.

Why are Taiwan index futures prices different from the index spot?

Many beginners ask: “Why is the Taiwan index futures quote different from the real-time index point?”

There are two main reasons. First, dividend factors. If large constituent stocks in the index pay dividends before futures expiry, futures prices will adjust downward accordingly, making them lower than the spot index. Second, interest rates. Futures contracts have a time value; higher interest rates increase the spread between distant-month futures and the spot.

However, a key rule is: as the expiry date approaches, the futures price and the spot index will converge and eventually be equal. This is the arbitrage mechanism at work.

Fundamental analysis: understand the big picture before trading

While Taiwan index futures are mainly used for short-term trading, ignoring fundamentals is risky. The largest component stocks in the index—especially TSMC—have a significant impact on the index’s movement. Therefore, you should regularly review the earnings outlook and valuation levels of these leading stocks.

More importantly, pay attention to macroeconomic conditions. The Taiwan Weighted Index is highly sensitive to the global tech sector’s health—its correlation with the NASDAQ 100 is as high as 95%. This means:

• Global economic slowdown can impact Taiwan index futures
• Federal Reserve rate hikes affect tech stock valuations, which in turn influence the index
• Geopolitical risks such as the Russia-Ukraine war and US-China relations can trigger risk aversion, dragging down the index

Learning to analyze from these perspectives will make your trading decisions more rational.

Hedging risks: Taiwan index futures can also serve as insurance

If you hold a heavily tech-stock-weighted portfolio, you can consider using Taiwan index futures to hedge risks. Since the futures are highly correlated with tech stocks, shorting futures when your stocks decline can generate profits to offset losses.

This is the core idea of futures hedging—using a small trade to protect a large position.

Risk management: the life and death line for Taiwan index futures traders

The high risk of Taiwan index futures stems from two key factors.

First: leverage effect. The small index futures (small lot) can have leverage up to 17 times. This means profits are amplified, but losses are also magnified rapidly. A 100-point market move can result in a 5,000 NTD profit or loss.

Second: unlimited risk. Unlike stocks, which can only lose up to the invested amount, futures can have unlimited losses on short positions. The index can rise infinitely, and your losses can grow without bound. On the long side, losses are limited to the margin posted.

Because of these risks, thorough preparation before entering the market is essential.

Capital management is the top priority

Core principle: Control the actual risk amount, not just the margin.

Your deposited margin is just a passkey; the real risk depends on your position size. For example, controlling 4 lots of small index futures with 46,000 NTD margin results in a nominal exposure of 3,120,000 NTD. A 50-point adverse move would mean a loss of 20,000 NTD—about 43% of your margin.

A good rule for beginners: Limit potential loss per trade to no more than 2% of your total account funds. If you have 1,000,000 NTD, your maximum loss per trade should be within 20,000 NTD.

Stop-loss orders are your second line of defense

When placing an order, also set a stop-loss price. If the market moves against you and hits that price, the position is automatically closed, preventing larger losses. Most trading platforms support this feature—be sure to use it.

Use options for hedging

Another advanced risk management method is buying Taiwan index options to hedge. When you buy futures, buy put options; when you sell futures, buy call options. This caps your maximum loss at the option premium paid(option cost).

The code for Taiwan index options is TXO, with a multiplier of 50 NTD, same as small index futures. To hedge one large lot of futures, you need four options contracts.

Advanced Q&A

Q: The contract is nearing expiry, and I want to roll over. What’s the simplest way?

A: Use a “spread order.” In the order interface, select “Buy”(if you are long) or “Sell”(if you are short), then input the price difference between the near-month and far-month contracts. The system will execute both the close and open trades simultaneously, avoiding timing risks.

Q: I want to place an order with a validity longer than one day, is that possible?

A: Check if your trading platform supports “GTC (Good-Til-Cancelled)” orders. These remain active until canceled, possibly for months.

Q: I bought Taiwan index futures during the day; can I close the position during after-hours trading?

A: Absolutely. Although the quote names differ between sessions, you are trading the same contract. Just select “Taiwan Index Full” or “Small Taiwan Index Full”(including both trading sessions) in the quote interface, and you can close your position at any time.

Trading Taiwan index futures is not mysterious—key points are risk control, discipline, and continuous learning. Start with small lots, accumulate experience gradually, and eventually find your own trading rhythm.