Futures Trading Basics

futures trading

A OnlineFuturesContracts trading contract is a legal binding agreement to purchase or sell a specific amount of a commodity, security, or currency at a certain price on a specific date in the future. The market participant may choose to take physical delivery of the underlying asset or settle the contract by receiving or paying the difference between the contract price and the actual price of the underlying asset at the time of settlement.

How to trade futures

The process of trading futures is similar to other financial markets, but there are some differences due to the underlying asset and the type of market condition. There are three basic strategies to operate the futures market based on the time, effort, and amount of your trades:

Finding Opportunities in the Futures Market

This strategy involves buying and selling securities within a few seconds or minutes. This is an efficient way to profit from small price changes in securities.

Day Trading

This style consists of selling and buying securities throughout a day. It requires more effort and time, but can also be profitable.

Position Sizing and Risk Management

When you start to trade futures, you need to be very disciplined around position sizing, risk and money management. This is a must, because there is a lot of downside risk when you buy futures contracts.

Traders who enter into long positions are expecting that the price of an underlying commodity will rise, while those who take short positions expect the price to fall. This allows them to earn a profit when the underlying commodity goes up in price and lose it when it drops in price.

Leave a comment

Your email address will not be published. Required fields are marked *