What is Futures Trading?
Futures contract is basically the agreement between a seller and the buyer. These two parties have agreed to either sell or buy an asset at specified future price and date hence the name. For every future contract, it is represented by specific amount of a commodity or a security.
As a matter of fact, the most traded commodity futures contract that futures trading brokers take advantage on is crude oil which has contract unit of at least 1000 barrels. On the other hand, every futures contract of corn is representing 5000 bushels or around 127 metric tons. It’s totally understandable if everything’s puzzling at first but if you make time to find out more about futures trading in this page, you’ll get it.
Truth is, future contracts were intentionally designed to back up farmers in hedging against the unpredicted changes in crop cost between planting season and when it can be harvested and supplied to market. While producers such as farmers as well as consumers keep utilizing the best futures trading system in hedging against the potential risks, then both traders and investors too will be using contracts mainly for speculation. They will eventually make profits by making bets on the direction where they think that asset moves. For more information regarding this matter, feel free to visit this site.
Yes it is true that the futures contracts are intended for agricultural commodities, it has adapted to change as well and now, future trading financial services have been doing contracts associated to other assets such as precious metals like gold, industrial metals like aluminum, energy in forms of oil, bonds like treasury bonds and stocks. All these contracts have a standardized agreement that trade on futures exchanges internationally.
The more information you know with regards to the basics of futures commodities and contracts, the better are your odds of succeeding in such trades. In any trading done over the web, there are various factors that should be taken into mind. And these are the things that you would discover later on; jot down notes as this will help you when doing futures trading or using automated futures trading system.
Capital requirements – in trading futures contract, you have to make deposit to your futures trading account as initial investment. The minimum investment to be made is going to vary depending on what platform you are using.
Leverage – this will depend largely on futures contract that you trade and also, the contract value.
Liquidity – like leverage, it is going to depend largely on futures contract traded.
Volatility – you’ll find a number of decent volatility in futures market with high leverage lets you make big profits.
You can learn more about futures trading by checking out Wisdom Trading.
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