Sest India Uncategorized The Basics of Futures Trading

The Basics of Futures Trading

futures trading

Futures trading is a form of investing that allows you to profit from fluctuations in the price of a wide range of financial assets. These can include stocks, bonds, currencies and commodities like oil and gold.

The market for futures is centralized, meaning that it trades on exchange floors. There are several exchanges, including the Chicago Board of Trade and the Mercantile Exchange. Go here

There are two types of traders in the futures market: hedgers and speculators. Hedgers use futures contracts to reduce risk in their business by locking in prices for raw materials and products they sell or consume.

The Psychology of Trading: Emotions and Decision Making in Futures Trading

Speculators on the other hand, seek to make a profit by betting on price movements in a specific contract. For example, an investor may think that the price of gasoline will rise from $2.50 per gallon to $3 per gallon in the near future.

Futures trades involve a variety of fees and mark-to-market requirements that can both reduce gains and increase losses. As a result, it’s important to develop a strategy that outlines entry and exit rules as well as risk management. Many traders also incorporate technical analysis into their strategies. For example, they might short an oil futures contract if the weekly oil inventories grow faster than analysts had expected. Alternatively, they might buy a gold futures contract if the price of gold exceeds the 200-day simple moving average.

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