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What is Futures Trading?

The agreement between seller and buyer is how futures contract is defined. These two parties have agreed to either sell or buy an asset at specified future price and date hence the name. Every single future contract is representing specific amount of given commodity or security.

As a matter of fact, the most traded commodity futures contract that futures trading brokers take advantage on is crude oil which has contract unit of at least 1000 barrels. Every futures contract of corn on the other hand is represented by 5000 bushels or around 127 metric tons. It looks like confusing at first but as you take time to know more about futures trading in this page, you’ll get to understand it sooner or later.

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. And as end users and farmers as well continued using the best futures trading system to counter risks, it will make investors and traders at the same time to use the contracts as a way to predict the market. Sooner or later, this will allow them to make profits simply by making bets on where they think the direction of asset will move. To learn more info about this subject, consider visiting this site.

And while the future contracts are focused on agricultural commodities like grains as well as livestock, future trading financial services have now included other contracts related to assets similar to precious metals like gold, industrial metals like aluminum, energy in forms of oil, bonds like treasury bonds and stocks. All of these contracts have standardized agreements that are trading on futures exchanges worldwide.

Needless to say, you have better chances of becoming successful if you know more info regarding the basics of futures commodities and contracts. With any kind of trading done online, there are several factors that must be taken into consideration. And these are the things that you would discover later on; jot down notes as this will help you when doing futures trading or using automated futures trading system.

Capital requirements – to trade futures contract, you must make a deposit to your futures trading account as an initial investment. And depending on the platform that you use, the minimum investment required is going to vary.

Leverage – depending on the contract value and the contract you are trading will set the leverage you can make.

Liquidity – like leverage, it is going to depend largely on futures contract traded.

Volatility – you’d be able to find a number of decent volatility in the futures market, allowing you to make huge income.

To have better understanding of each factor, go to Wisdom Trading.

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