The Basics of Futures Trading and Investing

Futures investing is usually thought to be the domain of experts and investing gurus due to the risks of such trading. However with the progression and rise in popularity of electronic investing and extended trading hours within the futures market, futures trading is becoming very popular with the trading public.

It’s possible to trade several types of futures almost around the clock, 5 days a week. Such futures contracts include market indices, foreign currency, commodities and even stock futures and futures options.

One more reason for the popularity of futures trading within the general trading public is the fact that heavily criticized pattern day trading rule does not apply. For that reason in contrast to stocks, investors with accounts under $25,000, can buy and sell futures contracts as much as they wish to. In addition, Brokers often grant investors significant margin allowances in order to trade futures.

As opposed to trading with stocks, retail investors typically don’t take actual delivery of the underlying asset . As an example, when you are investing crude oil, you are investing in a contract that expands out a number of months from the date you place the trade. In the event you held that contract up to expiry, usually your contract would roll over to the next month.

So essentially, retail traders who trade futures contracts are basically speculating as to the short term direction (down or up) of the underlying futures contract.

As mentioned, there are many types of futures contracts that can be invested in. A few of the very popular futures contracts include market indices, Crude Oil, and Gold and Silver. However there are there are many more commodities that can be traded on the futures market. Examples of these are Corn, Wheat, Coffee, Sugar, Soy Beans, Pork Belly and even weather forecasts.

So while investing in futures might seem somewhat overwhelming to some, the truth is they trade somewhat like stocks do. You have to focus on both the technical and fundamental variables which may have an impact on the price direction and velocity. If you manage your risk adequately, there’s significant money to be made in futures trading.

If you are interested in profiting by trading Futures, please check out Stock Shock and Awe for more information on Futures trading and investing.