Futures Market TradingThe futures market trading can be described as an investment tool, which is carried on in the futures exchange. The main participants in this market comprises of speculators and hedgers each having different goals in mind making futures trading very liquid. Futures’ trading is where-by you, the trader; enter into a contract with another party, with agreement being made between the other party and yourself to buy or sell an underlying asset at a pre-determined time and price in the future. This is called a futures contract. Futures contract, also known as forward contracts, are standardized and have features such as the delivery date, the futures price, settlement price and margin agreement . Note that if you, the trader, decide to exit the trade prior to the settlement date, you will need to offset your position by either selling a long position or buying a short position. This action closes the futures position along with any obligations. The following is an example of a simple trading strategy so that you have a better understanding: Let’s assume you expect gold to go up in price over the coming months. We are in January and the July gold futures is quoted at $2 an ounce. You deposit the required initial margin of $2000. By end of July, gold future price goes up to $4. You decide to take profit by selling. With each contract valued at $1000 an ounce, your profit equals $2000. Futures trading is risky and due to its high volatility nature it is certainly not for everybody, or the individual who does not want to part with his money. They are best suited for professional traders, investors and institutions. Don’ get me wrong…there is possible to make thousand and thousands of dollars in a short laps of time, but the possibility of incurring a substantial loss also exists.Top of: Futures Market Trading Page Back to: Learn Forex Trading Page Back to: Forex Trading Domain Homepage
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