FUTURES TRADING : How to Get Started

2007-03-08 10:33:40

( Financial )



Understanding Futures Trading

Futures Trading is basically where you and a counter-party agree to a price of a commodity today, for delivery in the future. During this time, you and your counter-party carry the risk that the commodities may increase in value, devalue or remain at the same price. On the contract maturity date, you can do two things: one is you cash-out your position, or you rake delivery of the commodity at the pre-arranged price.

Who Are Involved in Futures Trading?

There are two groups of people involved in futures trading: the hedgers and the speculators. Hedgers are those with an interest in the underlying commodity and are seeking to hedge out the risk of price fluctuations. Speculators, meanwhile, are people who seek to make profits by predicting market moves and buying a commodity on paper even if they have no commercial use for it. Many of these investors are engaged in traditional futures trading on futures exchanges while some also take part in online futures trading.

Individuals can also participate in the market. If you run a business, you may participate as a hedger. Or, if you have a substantial and diversified portfolio of investments, you might speculate using futures trading. A necessary requisite though is to have adequate resources to absorb potential heavy losses that may occur.

A Worthy Investment?

Futures Trading, whether with futures exchanges or on online commodities trading platforms, is inherently risky and complicated. While many people have become very rich in the commodity markets, take note that rewards and risks are always related. It would be unrealistic to expect to be able to earn high investment returns without taking high risks as well. You must know what you are doing. Learn how to trade correctly through books, courses or seminars.

Before You Trade

Before trading commodities, you must have clearly identified your financial goals and the amount of risks you can sustain. Try to determine the amount of assistance that you will need from your commodity trading broker in making trading decisions. Finally, check the registration status and disciplinary history of your broker with the National Futures Association.

Futures Trading gives anyone, with enough patience and determination, an exceptional opportunity for financial freedom and success. Acting prudently in your futures trading decisions is the way to go. Treat it like a business instead of a gamble. With the correct trading maneuvers, risks can be minimized and the possibility of success increases!


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