Futures: Summary and Resources
Buying and selling in the futures market can seem
risky and complicated. As we've already said, futures trading is not for
everyone, but it works for a wide range of people. This tutorial has introduced
you to the fundamentals of futures. If you want to know more, talk to your
broker.
Let's review the basics:
-
The futures market is a global marketplace,
initially created as a place for farmers and merchants to buy and sell
commodities for either spot or future delivery. This was done to lessen
the risk of both waste and scarcity.
-
Rather than trade in physical commodities, futures
markets buy and sell futures contracts, which state the price per unit,
type, value, quality and quantity of the commodity in question, as well as
the month the contract expires.
-
The players in the futures market are hedgers and
speculators. A hedger tries to minimize risk by buying or selling now in
an effort to avoid rising or declining prices. Conversely, the speculator
will try to profit from the risks by buying or selling now in anticipation
of rising or declining prices.
-
The CFTC and the NFA are the regulatory bodies
governing and monitoring futures markets in the U.S. It is important to
know your rights.
-
Futures accounts are credited or debited daily
depending on profits or losses incurred. The futures market is also
characterized as being highly leveraged due to its margins; although
leverage works as a double-edged sword. It's important to understand the
arithmetic of leverage when calculating profit and loss, as well as the
minimum price movements and daily price limits at which contracts can
trade.
-
“Going long,” “going short,” and “spreads” are the
most common strategies used when trading on the futures market.
-
Once you make the decision to trade in
commodities, there are several ways to participate in the futures market.
All of them involve risk, some more than others. You can trade your own
account, have a managed account or join a commodity pool.
Related Links:
Futures 101 - An
awesome tutorial on understanding the risks and opportunities of futures
trading.
Derivatives -
Futures - A brief article by invest-faq.com describing the futures
market.
FuturesKnowledge.com
- Offers free futures trading guides, home study courses, and more.
Optionetics
- If you want to know more about options and futures, you can learn from the
best here.
Barkley Financial - Get a free CD-ROM on options/futures investing
education. We find it quite informative.
Next==>>
Futures Markets and
Contract Specifications
<<== Back to
Table of Contents for Futures
A
teacher is never a giver of truth;
he is a guide, a pointer to the truth that
each student must find for himself.
A good teacher is merely a catalyst.
-- Bruce Lee
--
|
