We all want an additional source of income to supplement our primary income. Be it establishing a business, buyingshares, investing in a business, or trading in the stock market. Rowan Relton stated that the sole aim is to make a profit and get more money. Rowan Relton is an Australian international trading professional with more than 10 years of experience.
A way of trading in the stock market is futures trading. It is used in stock and commodity trading and only experts can do futures trading.
What is Futures Trading?
Totrade in futures, traders need to have futures contracts. Futures contracts areagreements signed for trading at a later date with a fixed rate, says commodity trader – Rowan Relton . It may be commodity trading, the farm produces trading, shares, digital currencies, and many more. It involves two parties and each has to accept the terms and conditions. They have to specify the number of goods to be delivered and the money to be paid on a particular day.
Futures trading is done by finance professionals like those who wish to invest, the suppliers, and buyers.
Stocks that are marketed on futures are cocoa, cotton, soya beans, grains, oil, and many more.
What to Expect as a Futures Trader
A futures trader can negotiate prices of goods or shares with sellers before the prices are fixed. This type of trading prevents traders from being affected by price volatility in trading. They are protected from price inflation or deflation.
Take this scenario; you are interested in buying corn with futures trading. You've seen a seller to buy from. You contact the seller, make futures treaties, and set a percentage and quantity. You propose to purchase 1kg of corn for $100 every month for a year. Three months later, the cost of corn increased to $150. It won't affect you because you and the seller have agreed to a cost of $100.
On the other hand, if the cost of corn decreases to $50, it won't affect the corn-seller. You have to pay the seller the fixed cost of $100. In both scenarios, the seller or the buyer will be protected one way or the other.
Futures investments are for those interested in earning incomes if the cost of goods fluctuates. They want to use stock value and exchanges to make profits. The opportunity is there and numerous because many people trade every day.
Risks Associated With Future Investment (or Trading)
All businesses, trading, and investment have risks associated with them. Some people take up loans just to do futures trading. Some may even get huge loansfrom banks, friends, families, or financial institutions to play big. It is their way of making huge profits if futures trading favors them. The downside is that loans add to the stakes involved in future investment. If their future trading doesn't favor them, they lose money and their effort. Apart from that, they will need to pay back the loan with its interest. If they fail to pay on time, the interest on the loans increases, or they may lose their collateral.
Futures Trading Tips
To trade futures, you need to know some technical terms and have adequate knowledge.
There are rules governing future buying and selling. They are:
1) Margin Rules
2) Leverages Rules
These rules are not as strict in future investment as in normal trading. There are leeways for buyers and sellers.
If the leverage is huge, profits and possible risks will be huge. A buyer or seller may win or fail to based on the future cost of the products. Hence, both of them should be cautious when doing futures trading. There are other types of trading to do if the risk involved in future investments is unmanageable.
Who Is A Future Investor?
To be a futures merchant is not that difficult, but it's advisable to have the guidance of professional brokers. Sign up with expert brokers who have experience in the particular commodity you're interested in. You also have to disclose your finances and the budget available for the deal to the agent.
Your finances and budget will determine how much you can use to trade. It will also affect the kind of risk you may put up with. The type of assistance the agent offers will determine his fee structure.
You can also go online to register a futures investment account and try a demoversion to practice. It facilitates real-life exchange and accustoms you to the method, risk, and benefits associated with trading, says Rowan Relton.
These demo versions show you the power and limits of futures trading with online tools. Demos teach you how to purchase, trade, and make profits in real-lifesituations.
Once you're accustomed to the way futures trading works, then you may start the realtrade.
Conclusion
Futures investment is riskier for novices but experts manage the risk better. Hence, it's advisable to practice with demo versions online. Many futures experts try digital trading first then proceed to the real trade.
Futures trading is one of the best ways to protect traders and investors. Especially those who live or trade-in countries with unstable economies.
