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An introduction into the futures trading markets, commodities trading, some history of futures trading, and some examples of futures trading going long or short in the futures market for speculators and hedgers...

Articles for Investors, Futures Markets Speculators and Hedgers...

The futures trading markets are a meeting place for buyers and sellers of many different commodities futures like financial futures, oil futures, gold futures, silver futures, copper futures and many more. The futures trading market is a continuous commodities futures auction and used for showing information about future supply and demand, foreign currencies and stock indexes. Futures trade daily and are mainly used by producers, consumers and speculators in the futures trading markets.

The rapid growth of the futures markets in late 1970, from 14 million contracts being traded to over 179 million futures contracts and futures options contracts being traded in 1985. In 2021, 29.28 billion futures contracts were traded worldwide, up from 12.13 billion in 2013.

The futures trading markets primary purpose still remains the same and has been now for about fifty years. The futures trading main purpose is to provide the mechanism for managing price and risk in the market. Future contracts, buying or selling future contracts and establishing a set price now for specific commodities or items to be delivered later an individual investor or business is doing their best to provide security or insurance against adverse commodity price change. This is also known as hedging.

When you participate in futures trading you are agreeing to buy a commodity or product that a seller has not produced yet at a set commodity price. This does not mean you will be responsible for delivering huge amounts of products, goods or commodities.. The main reason buyers and sellers enter into the futures market is to hedge the risk or to speculate not to exchange goods physically.

For example, future trading, going long: If you buy gold commodity or oil commodity at a set price and it goes above your set price you have a gain.. If it falls below your set price you have a loss. In this example you are future trading a commodity and anticipating the commodity will go higher in price and you will gain.. This is called going long.

For example, future trading, going short: If you buy gold commodity or oil commodity at a set price and it goes above your set price you have a loss.. If it falls below your set price you have a gain. In this example you are future trading a commodity and anticipating the commodity will go lower in price and you will gain.. This is called going short.

For individual investors who are not comfortable futures trading on their own. Speculating in the futures market and futures trading on you own has become a preferred way to diversify and potentially you can have a good return. But if you are not sure or confident enough to do you own futures trading, you can hire a profession futures trading adviser or futures broker to avoid the responsibilities of trading futures on a daily basis. You can giving the firm the authority to fully manage your account within a preset guide line that you and your manager set in-place before you buy or sell any commodity futures. Set what to buy when to buy and when to sell in advance, also you can participate in a commodity pool this is similar to and on the same line as a mutual fund.

Speculating in futures contracts is not for everyone, and although you can gain and realize great profits in a very short period of time, the risks or losses in the futures market can be also be great if you are on the wrong side. This form of trading is different then stock trading. Futures trading is a highly leveraged form of speculation and can have great returns on the initial capital investment. The fact that a relative small amount of capital investment in the commodity futures market is requires to control your assets having a larger or greater value. Going long or going short can give you an advantage in the futures market.
An introduction into the futures trading markets Articles Continued...

An introduction into the futures trading markets Articles Continued...

For individual investors: For investors, individuals who completely understand the risks and can afford the loss involved can allocate a portion of their capital to futures trading.. This will greatly diversify your portfolio and can be a means of achieving a higher overall return on your investments. Combining futures trading with stocks and bonds is a great way to minimize the risk and become more diversified.

When hedgers and speculators enter in the market, they are buying futures contracts to try and protect themselves from future price increases or future market declines and make a profit either way.

The number of hedgers and strategies in the futures markets are virtually limitless and hedging can save a business from rising costs short term and long term. The bottom line, hedgers can offset against interest rates and rising costs of production materials and stock prices. Futures hedgers have for the most part control over price a set an acceptable price for a given commodity their willing to buy or sell in the future. Hedging is the best way to try to provide the investor, speculator or merchant some form of security or protection against risks in the futures markets price changes.

Futures Trading What is a Futures Contract:
Futures contracts consist of two main contracts, futures contracts that are for real delivery of a commodity and those futures contracts that are for a cash settlement.

Futures cash settlement is simply the holding of a cash settled future until expiration. At that time, there is a final margin payment, and the contract expires.

Very few futures contracts are the delivery type of contract. Most hedgers, speculators and investors in the futures markets do not have any desire to take delivery of say 500,000 pound of grain or sugar contracts they bought or sold.