The futures market is an exchange whereby assets can be traded using future expiration dates. The futures market was initially designed for the purpose of trading of commodities. It started off in Chicago, where commodities were paid for upfront to hedge against inflation and price fluctuations while delivery of the commodities were to be executed at a future date. However, the market has evolved to not only enable the trading of other assets as futures, but has also enabled CFD (contract for difference) trading as well. CFD trading involves contracts whose trades are based on the price of the asset alone.
Trading in the futures market comes with the following features:
- All futures trades expire.
- Trading futures contracts is highly leveraged.
- Various assets that are traded as futures market contracts include stocks and commodities.
- Trading the futures market is highly risky and requires a great deal of skill.
- You can profit from the futures market under any market condition.
- Trading the futures market can be very profitable. You can take advantage of the opportunities offered and open a futures market trading account today.
THE LIFESPAN OF FUTURES CONTRACTS
All futures market trades have a maximum lifespan of three months. This is also known as the delivery date on the contract. For market trading purposes, the delivery date marks the end of the current contract and commencement of a new one. If a position is open, it is automatically closed and settled at the expiry value resulting in either a profit or loss (depending on the difference between the expiry value and the initial price of the contract).
Futures contracts require a great deal of capital to maintain. Therefore, the market structure is designed to facilitate the provision of leverage. With leverage, the trader is able to buy and sell exponentially larger sums of money than the actual amount invested. The trader is expected to provide capital to collateralize the position. This is known as the ‘margin’. Typically, the required margin for futures contracts is higher than of other markets.
Today, almost any asset can be traded as a futures contract. This is made possible by contracts for differences (CFDs). CFDs are contracts whereby only the price variations on the assets are traded as opposed to buying and selling the assets themselves.
FUTURES MARKET TRADING IS FOR THE EXPERTS
Futures market trading is not for novices. The risks are high but so are the rewards. In order to turn the risk into increased rewards, the trader should be well versed in the art of trading futures. This requires lots of practice and study.
PROFITING FROM ALL MARKET CONDITIONS
One of the advantages of trading futures contracts is that whether the market is trending or in consolidation, they can be utilized in all types of market conditions. This lies in sharp contrast to the forex or stock market whereby opportunities dry up in markets when consolidation is in progress. However, this is not the case with futures contract trading.
Trading the futures contracts is exciting and the profits are well worth the risk. You can learn how to trade the futures market and join an elite club of traders who profit from this type of activity on a daily basis.