Futures Trading Information

Written by Michael Federico
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Several different securities actually fall into the futures market. However, when the majority of people talk about trading futures, they are talking about trading commodities. Commodities futures are a major part of the American economy, yet most Americans know nothing about them.

People make money on futures when something drastic occurs in the market in a short period of time. A person usually places a futures order when he feels something is about to happen that will greatly alter the worth of his purchase. For instance, if he believes the price of pork belly futures is about to go through the roof, he can buy up several contracts, and quickly turn a profit when the price rises. However, if he thinks the pork belly futures are looking bleak, he can quickly sell off his shares before the drop occurs. Needless to say, if he is wrong in either scenario, he can lose a lot of money.

Why Risk It?

Not everyone is cut out to trade futures. There is an incredible amount of risk involved with almost every trade. Also, the money required to trade futures seriously, often far exceeds the money needed for simple stock trades.

The risk can be worth it, because the payoff can be huge. People can turn extremely high profits on very few trades when dealing with futures. Anyone who enters into the game needs to be fully aware that fortunes have been made and lost in the blink of an eye. That does not mean that it is impossible for an individual investor to trade successfully on a smaller scale. E-mini futures contracts are not as large or as expensive as standard orders. They allow people to trade futures without risking everything at once.

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