Futures contract is simply defined to be the agreement of seller and buyer. This works when the two parties agreed to sell or buy assets at a given time and price. For every future contract, it is represented by specific amount of a commodity or a security.
The truth is, many futures trading brokers are making money by trading crude oil for it has a contract unit of at least 1000 barrels, making this as the most traded commodity in futures contract. On the other hand, every futures contract of corn is representing 5000 bushels or around 127 metric tons. It’s totally understandable if everything’s puzzling at first but if you make time to find out more about futures trading in this page, you’ll get it.
The fact is, helping farmers to hedge against the unforeseen changes in cost of crops between planting season and when it can be harvested and supplied to market is the initial objective of future contracts. While producers such as farmers as well as consumers keep utilizing the best futures trading system in hedging against the potential risks, then both traders and investors too will be using contracts mainly for speculation. Sooner or later, this will allow them to make profits simply by making bets on where they think the direction of asset will move. For more information regarding this matter, feel free to visit this site.
Yes it is true that the futures contracts are intended for agricultural commodities, it has adapted to change as well and now, future trading financial services have been doing contracts associated to other assets such as precious metals like gold, industrial metals like aluminum, energy in forms of oil, bonds like treasury bonds and stocks. All these contracts have a standardized agreement that trade on futures exchanges internationally.
The more information you know with regards to the basics of futures commodities and contracts, the better are your odds of succeeding in such trades. With any kind of trading done online, there are several factors that must be taken into consideration. These are what you will learn in the next lines which can be so useful when you’re doing futures trading or using automated futures trading system.
Capital requirements – in trading futures contract, you have to make deposit to your futures trading account as initial investment. Depending on the platform you’re using, you must read how much the minimum investment should take.
Leverage – depending on the contract value and the contract you are trading will set the leverage you can make.
Liquidity – once again, liquidity relies on futures contract being traded.
Volatility – you’ll find a number of decent volatility in futures market with high leverage lets you make big profits.
All this can be learn in a more comprehensive material by visiting Wisdom Trading.