Futures Trading

Written by Michael Federico
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People who trade stocks are generally hoping that their shares will increase in price, that they will be able to sell high and turn a large profit on their trade. It is a fairly straightforward process, and it is practiced by millions of people all over the world. Futures trading is not quite as common as standard stock trading, and it is definitely not as cut and dry.

When dealing with futures, a person generally foresees a relatively major swing in prices. This swing might be upwards or downwards, because a person can actually make a lot of money from a futures contract if prices drop. In fact, many people who deal in futures will play on both sides of the line, basically hedging their bets.

Is Futures Trading Risky?

When a person inquires about futures trading from an online service, the first thing to pop up is usually a statement of risk. While trading of any kind is risky, there is more at stake with futures. Often, futures contracts are for incredibly large sums of money, so one bad trade can put a person deep in debt. Also, there are elements that affect certain futures contracts such as commodities orders that simply do not play into most traditional stock trades. If a person buys futures based on the belief that the Florida orange crop is going to get wiped out, causing costs to escalate, and things end up going the other way, he can lose everything in a very short time.

Certain programs and seminars help people to better understand futures trading. These can make it easier for a person to recognize certain trends in the market. However, whenever the future is involved, there will always be unforeseen shifts.


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