A future market or future exchange is a central financial exchange where people can trade. In which Futures contracts are an agreement between a buyer and a seller to buy or sell the underlying asset at a specified price and date in the future.
2. Index
1. Future Market
2. Advantages of Futures Trading
1. Futures contracts are leveraged
2. Futures contracts are very liquid
3. Commission is lower compared to other
investments
3. Future Market
A futures market or futures exchange is a central
financial exchange where people can trade
standardized futures contracts; that is, a contract
to buy the financial instrument or specific
quantities of a commodity at a specified price with
delivery set at a specified time in the future.
Futures contracts are an agreement between a
buyer and a seller to buy or sell the underlying
asset at a specified price and date in the future.
5. 1. Futures Contracts are
Leveraged
If you decide to trade on the futures market, you
can make leveraged trades.
That means you can open a much larger position
than the size your trading account, by putting
aside small collateral called “margin”.
Your broker calculated the margin requirement
automatically, so you don’t have to worry about it
yourself.
6. Once you close the position, the margin will be
deposited back to your account.
However, trading on leverage carries also a larger
risk of losing money, as it magnifies both profits
and losses.
7. 2. Futures Contracts Are Very
Liquid
Most of the futures contracts are very liquid and
have a large number of potential buyers and
sellers in the market.
More liquid assets are less volatile, as you can
find potential buyers very quickly if you are selling
a futures contract; and potential sellers if you are
buying a futures contract.
This is especially true for contracts that are near
the expiration date.
8.
9. 3. Commission is Lower
Compared to other Investments
When trading on the future market, brokers
usually charge the lower commissions compared
to the other markets.
You can open a trade paying just a $5 fee with
some discount brokers.
It is especially important if you are a scalper or
day trader who opens many trades in a relatively
short time.