What is Futures Trading?
Futures contract is simply defined to be the agreement of seller and buyer. This works when the two parties agreed to sell or buy assets at a given time and price. For every future contract, it is represented by specific amount of a commodity or a security.
Whether you believe it or not, crude oil has a contract unit of a minimum 1000 barrels which at the same time is the most traded commodity futures contract wherein even futures trading brokers make most money. On the other hand, every futures contract of corn is representing 5000 bushels or around 127 metric tons. It may seem to be confusing at this early stage but if you read more about futures trading in this page, you’ll soon understand it.
Originally, future contracts were made to help farmers hedge against the changes in cost of their crops between the planting season and when it could be harvested and supplied to the market. While the producers like farmers as well as end users keep using the best futures trading system to hedge against potential risks, both traders and investors as well is going to use contracts all for the speculation purposes. They will eventually make profits by making bets on the direction where they think that asset moves. To learn more info about this subject, consider visiting this site.
While futures contracts are centered on agricultural commodities similar to grains and livestock, the future trading financial services do include contracts that are linked to other types of assets such as precious metals like gold, industrial metals like aluminum, energy in forms of oil, bonds like treasury bonds and stocks. These contracts have standardized agreements which trade international futures exchanges.
It is pretty obvious that the more information you learn about futures commodities and contracts, the higher your chances for succeeding in trades. In any trading done over the web, there are various factors that should be taken into mind. These are exactly what you would learn in the next paragraphs, which can be very useful when doing futures trading or using automated futures trading system.
Capital requirements – there’s an initial investment need to be deposited on your futures trading account before trading futures contract. And depending on the platform that you use, the minimum investment required is going to vary.
Leverage – this will depend largely on futures contract that you trade and also, the contract value.
Liquidity – once again, liquidity relies on futures contract being traded.
Volatility – you’ll find a number of decent volatility in futures market with high leverage lets you make big profits.
All this can be learn in a more comprehensive material by visiting Wisdom Trading.