The Basics of Futures Trading

Have you heard of futures trading? From day trading to positions trading

, many people trade in the futures markets. There are also futures options where traders trade an option contract which is directly related to the underlying futures market.

- Discount Futures

What exactly are they trading? Future commodity trading is not like the stock market where people buy shares of a stock. You do not actual own anything. You are just speculating on what the price will be of a commodity in the future.

When you want to put on a futures trade, you must first put up margin money. This is in case the market moves against you; you will have enough capital to pay the loss to the brokerage firm.

- Discount Futures

Although speculators make up the bulk of futures traders, the markets were intended to protect farmers from losing everything. A farmer can hedge in the futures and protect any loss he will have in the cash market. A farmer can sell the futures, if he thinks the price will rise before the harvest. Regardless of the wheat's on the market, will guarantee both its price.

A speculator is only commercial interests at a profit. If he thinks the market rises, he is buying futures. If he thinks the market falls, he would sell the future. You do not have to ownThe first contract, to sell it. First, you can sell the futures contract.

Is there a danger in any kind of trade. That is why some traders only buy futures options, so they know their risk, which limits them to pay for the option. Others, who trade futures contracts, technical analysis, as Fibonacci trading. You will only enter trades that the criteria of chart analysis.

http://www.discountfutures.pannipa.com/2009/10/10/the-basics-of-futures-trading/

The Basics of Futures Trading

By: Gordon

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