In the stock trading industry, many people have garnered a lot of money from futures markets. It is only in this arena where people who have limited capital can actually make substantial profits even in a short period of time. But because like any other market, this involves a lot of risks and may cost you significant losses, people may often fear to get involved.
Despite its bad reputation however, many experts would claim that futures trading could only be as risky as you want to make it. And if you take on good strategies and give yourself the proper exposure, then this can make you very rich.
Futures are contracts between two parties. They are transferable and standardized and require a party to buy a contract at a specific sum and within a particular time frame in the future. The contract allows the buyer to purchase the stock and the seller to deliver the stock of the traded asset.
Unlike options, futures contracts require the traders to buy and sell instead of just merely giving them the option to purchase or sell.
Traders are able to profit from futures trading by speculating on which direction stocks or commodities are going to move in the future. This can provide traders with substantial returns but on the other hand, if things dont go well, large losses can occur.
Futures trading has become popular in many trading strategies, particularly day trading. These kinds of trades offer a broad range of markets which can be traded very cheaply.
Futures Trading is suited in both bull and bear markets. Long investors can buy contracts to sell in the future while short traders will sell contracts with the intention of buying them back at a discount down the track.
With futures, investors are able to profit regardless of whether the market is trending up or down. Either way, futures traders want the market to be moving and not stagnant.
In futures trading, instead of taking or making deliveries, a trader merely speculates his position in the market’s volatility by predicting directions of trends. If prices move in the right direction, then the trader would be able to profit. If this does not happen, then a trader would experience some losses.
This particular arena in trading can be very promising, but it involves so many risks as well. But if you are well experienced in trading stocks and have adopted quite an understanding in the different trends, behaviors and strategies that the industry has to offer, then chances are, you may probably do well in this particular playing field.
Now, this may sound fairly easy at first blush, but if you are serious about engaging in futures trading, you need to make sure you do your research and paper trade before you outlay any money.
Dont forget, there are large risks involved with trading futures but as long as you have a strict set of rules and stick to them, you should be able to generate good profits once you know how to trade futures.
Substantial profits can be realised when you have done your research and learnt how to trade futures. Take a look at Harry Lombards site how to trade futures to find out more.. This article, A Simple Guide on How To Trade Futures is available for free reprint.