What is Futures Trading?
In futures trading, you take buy/sell positions in index or stock(s) contracts expiring in different months. If, during the course of the contract life, the price moves in your favour (rises in case you have a buy position or falls in case you have a sell position), you make a profit. In case the price movement is adverse, you incur a loss. To take the buy/sell position on index/stock futures, you have to place certain % of order value as margin.
Because the terms of futures contracts for each commodity or asset are standardized (i.e., same quantity, quality, delivery), they can be traded on an exchange. The only variable is the price of the futures contract. This means you can buy or sell barrels of oil or bushels of corn or bars of gold. You do not need to take delivery of the commodity today—it’s a “future” contract—so you do not need to rent storage tanks or bank vaults to profit from price movement. As a stock trader, you know this differs from stocks in that stocks represent actual ownership of a corporation. The “$value” of that ownership depends on the quality of the product being sold, the talent of the management team in place, the competition, etc. The $value of a crude oil futures contract, for example, depends on what people believe the price of oil will be on the date the contract expires. If you believe the future price of oil will be higher, then you would buy the contract. If you believe the future price will b
Futures’ trading is a form of investment which involves speculating on the price of a commodity rising or falling. What is a commodity? Most commodities you see and use every day of your life: • the corn in your morning cereal which you have for breakfast, • the lumber that makes your breakfast-table and chairs • the gold on your watch and jewelry, • the cotton that makes your clothes, • the steel which makes your motor car and the crude oil which runs it and takes you to work, • the wheat that makes the bread in your lunchtime sandwiches • the beef and potatoes you eat for lunch, • the currency you use to buy all these things… … All these commodities (and dozens more) are traded between hundreds-of-thousands of investors, every day, all over the world. They are all trying to make a profit by buying a commodity at a low price and selling at a higher price. Futures’ trading is mainly speculative investing, i.e. it is rare for the investors to actually hold the physical commodity. If
When most people think of futures trading, two things come to mind: extraordinary financial risk, and very rich people. Those two things often go hand in hand, but nowhere is that the case more so than in the world of futures trading. Futures are contracts for the delivery of specified amounts of a certain commodity, on a certain date in the future. Many of the commodities involved in futures trading are agricultural, such as wheat, pork bellies, and orange juice concentrate. However, futures contracts for many other “commodities” such as precious metals, currencies, and even interest rates, are also traded and exchanged. Futures trading is unlike many other forms of investing, because one is not required to own or even buy the commodity. All that is necessary is to make a speculation on where the price of a particular commodity is going, and make a decision based on that. If an investor were speculating on crude oil, for instance, and he or she expected the price to go up in the futur
And exacly why and how does the analysis of futures trading relate so favorably and profitably to success in stock trading and the stock markets? A complete industry overview – who, what, where, when, how and why – starting from its ancient and fascinating origins in feudal Japan. What and where are the best markets to trade? What exactly is market volatility? What is Liquidity? How do they factor in? The markets the author trades, the ones he avoids, and why. Are you a night person? Trading the international markets in real-time. Taking advantage of the best contracts on the most liquid foreign exchanges. What are the most profitable markets, in detail, and how to access them. What is the risk in futures (and stock) trading? How do you control the risk? What is risk management? What is money management? What are the safest formulas? How does the market tell you where it is going? The exact order techniques the author uses, for both profit and protection, and why. The chance of a dice
