subject: Risks Involved in Futures Trading [print this page] Futures' trading carries with it a large number of risks. Anyone who tells you it is 100% risk free is either ignorant or trying to sell you something. Therefore, the best strategy is to play this game based on the cards you have and hope for the best.
Also, Futures trading does have huge rewards if you win and that's probably the reason many people are attracted to it.
Here are 4 main risks when trading in futures. You might want to read further before deciding Futures Trading is suitable for you.
Speculative Business: Futures Trading is speculative in nature. And so, no matter what the experts predict, it is not always 100% accurate. The strategy for undertaking futures trading is not to put all your eggs in one basket, divesting your investment among different financial instruments.
Technical Knowledge: Futures Trading requires an knowledge of financial instruments. If nothing else, you must at least be knowledgeable in the 4 main investments categories namely, income, growth, speculation and inflation hedges. Without adequate knowledge, it will restrict you to where you can invest on the market and lose potential revenue on a particular sector of the financial market.
Financial Backing: Futures Trading requires a large capital. Therefore, it is definitely not for the faint of heart. If you are one of those who want to make money in futures trading to pay your bills, it is a wrong idea. You should not use money to pay your bills/loans/grocery to dabble in futures trading. Only use money you can afford to expend.
Only Invest What You Can Lose: If you decide to undertake Futures trading , you must build a balanced portfolio with only a certain percentage invested in futures. The percentage you decide should depend on your financial standing and your investment strategy. In general, only use money that you can afford to lose in futures trading.
These are the 4 main risks involved in futures trading which you must clearly understand before you decide to venture into Futures Trading. Thus, a carefully drafted trading plan is a must before attempting to enter this extremely competitive business.
One company that helps you take a shot at futures trading is United Futures. For more information about the products and services of the company, please log on to www.unitedfutures.com
