Friday 20 July 2012

Futures Trading for Beginners

Futures trading is different from investing in the stock market or bonds since you don’t actually own anything. In futures trading, you are speculating on the future direction of the price in the commodity you are trading.

This is different for beginners in futures trading; it is like a bet on the future price direction. The terms "buy" and "sell" merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest.

Trading futures has the potential to be an incredible profit maker. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years.

You may only be a beginner trading futures, but you are savvy enough to recognize the potential in futures trading.

The beginner in futures trading needs to understand that futures are not trading on the stock market. Some of the locations are well known like the Chicago Board of Trade, the New York Mercantile, the New York Cotton Exchange and the Chicago Mercantile Exchange. Some of the better known futures markets are:
  • Agriculture – This is a broad, commonly traded futures which includes such things as wheat, soybean and corn futures.

  • Currency Trading – Currency trading, also known as FOREX (foreign exchange) trading, involves buying and selling currency from many different countries such as the US dollar, the British pound and the Japanese yen.

  • Interest Rate Futures – This market focuses on financial transactions, interest rates and bonds.

  • Energy Futures – This market centers its attention on gas and oil futures.

  • Foods – This sector includes items such as coffee, sugar and orange juice.

  • Metals – This is one of the more popular and better known sectors. The typical commodities in metals are gold and silver. [ Via ]

1 comments:

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