Futures Market Basics

Futures Market Basics

A market that offers people opportunities for profit is the futures market.Trading has been providing numerous people with opportunities to make more money, by taking calculated risks, for decades. The various trading options have given more individuals a chance to make more money than they ever thought possible. While this was the domain of big companies in past years, more individuals are learning how to maximise on trading opportunities, thanks to various online platforms.

What is the futures market?

A futures contract is a financial contract in which two parties agree to transact a set of financial instruments or physical commodities for future delivery at a particular price.

The value of a futures contract is determined by the movement of something else. The contract has no set expiration date, so when trading futures, market direction and timing are vitally important.

Futures trading is rarely suitable for individual investors. Most participants are hedgers and others are speculators.

Important factors to consider when considering trading on the futures market:

  • Your financial experience, goals and financial resources. Be clear about what you aim to gain from trading and also about how much money you realistically have to put up.
  • Understand all obligations. Make sure that you understand how it works before you start trading.
  • Know how much you can afford to lose. Be realistic and avoid being impulsive.
  • Read the risk disclosure documents provided by the broker.
  • Ask questions and do your research before opening a trading account.
  • Futures contracts cover a wide range of commodities such as agriculture, livestock, energy, metals, interest rates, currencies.

Why trade on the futures market?

The futures market is there to allow those who wish to manage price risk to transfer that risk to those who are willing to take that risk for an opportunity to profit.


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