What Is Futures Trading?
One of the main reasons why investors opt for futures trading to hedge investments is because futures trading enables them to lock-in prices to buy or sell goods without any uncertainties. This means that the buyers and sellers of goods can know at what price they can sell or buy when an event occurs. Here are more insights as to how a futures contract works.
What is a futures contract?
Futures contracts are financial products, which are like derivatives trading as these are structured on the asset value at some specific time. Future contracts are simply done by a buyer and a seller where the buyer buys the future contract of a financial product at a fixed price. When the market price fluctuates concerning the fixed price awarded to it, eventually there would be profit or loss generated.
What is meaning of futures trading?
Future trading meaning is a fairly new term in the financial market and it has nothing to do with futures. It is more of a short form for future obligation which refers that there is a future trade to be done between the two parties. No matter how much you wait, the future obligations will be executed on the agreed future date. To understand futures trading, you need to understand futures first. A futures contract is a bilateral agreement to buy or sell an amount of an underlying asset at a predetermined price.
If you believe that the underlying asset will rise, future contracts are a great investment.
It is possible to transfer the ownership of future contracts. If the seller wants to move out of the contract he/she can transfer the ownership of future contacts to some other party. This applies to the buyer as well.
SEBI REGULATIONS FOR FUTURES COMMODITY MARKET IN INDIA: Futures trading in India has attracted many investors from all over the world. In India, SEBI (Securities and Exchange Board of India) is the regulatory authority for providing license for futures trading in the local market. It is continuously that SEBI comes up with regulations, guidelines and compliance reports that help a trader not only to trade in futures but also to thereby develop knowledge of the said markets.
Future contracts follow a standardized procedure and are awarded to the lowest qualified bidder. The bids are public and can be reviewed by any interested party at the city purchasing office, located at 123 Main Street.
In futures trading, the settlements are done through cash. The differences in cash values are paid by one party to another.
How to Trade a Futures Contract?
Now that you know what is future trading let us understand how to trade in the futures contract.
In this guide you will learn how to trade futures contracts. This guide will hopefully make it easier for you to understand the futures market, which is often confusing for anyone new to futures trading.
Futures trading meaning is done basis the price movements rather than buying or selling a stock. This means that, futures traders bet on the price changes in assets, indices and commodities. The two types of participants involved in futures trading are the Hedgers and Speculators.
Speculators take risks in order to create a profit for themselves. Their goal is to purchase futures at a low price and sell them at a higher price. Hedgers do not want the risk, they only seek to protect themselves from risk. All futures trading is done through an online futures broker, which will be either a commodity trading advisor (CTA) or a commodity pool operator (CPO). After you choose your broker you will learn how to use their trading platform.
