Futures trading is not really a right-place-right-time kind of endeavor. No. Rather, it is a high-level game of optimizing probabilities, financial market speculation, and gambling (responsibly, of course). But if you are ready to embark on this probability-optimizing, market-speculating journey, you need a game plan, aka this article. Below is your guide to the world of futures trading, so let’s get into the weeds of futures trading.
What is Futures Trading?
There is a futures contract whenever two people agree to buy and sell something at a certain price at a specified time in the future. Traders are pretty much looking into the future, making what is hopefully an educated guess on the price of goods they can buy and sell in the future. This sounds promising, but it also comes with risks. Margin trading is one of the most beneficial concepts in futures trading. It enables traders to make some pretty massive trades and get some big returns, all while using less money.
Understanding Margin Trading
Using margins in futures trading can be an exciting jump, but it must be cautiously entered into. In the simplest terms, it is the borrowing of money from the broker to increase exposure in the market. A trader uses the borrowed money to place a trade that is greater than what they can afford. In turn, the traders can place trades that are greater than the capital actually raised by the trader. But the catch is if the trade goes south and there is a movement in the counter-price’s favor, then you may face higher losses than the capital you have raised.
Choosing the Right Futures Trading Platform
To begin trading options, finding the right platform is very important. Look for a platform with strong market research and analysis tools and the ability to make efficient trades and monitor your positions. Search for platforms that have intuitive interfaces, good charting capabilities, and strong security measures in place to safeguard your personal and financial information.
The Importance of Education
Education is critical to becoming a successful futures trader. Take advantage of the resources you have at your disposal whether you are new to the game or you have been in it for a while. Watch webinars and read articles. Watch tutorials and look through every resource on futures trading.
Start with the basics and then move to technical analysis and risk management. The more you know, the more you can trade. Profitably, of course.
Practicing with a Demo Account
Before you put in actual money, use their demo account. This lets you trade with fake (demo) money and with platform and conditions so you get a good feel of futures trading and the platform. You can implement your strategy and see how leverage makes an impact without risk.
Engaging with the Community
Futures trading is not one of those “go-at-it-alone” experiences. There is a community waiting for you with open arms if you choose it–and yes, you should choose it. There are forums, a bucket load of interactive Blogs, and social media groups and pages where there are a bunch of like-minded people airing grievances and sharing advice. So take advantage of that.
Futures Trading: A Portfolio Must-Have
Futures trading is really not complicated, however, it is quite the gamble that requires some skill, lady luck, and knowing you could lose big and win big.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
