Level2StockQuotes.com - Futures Trading Markets - Brief History

Features futures trading markets brief history how it got started. The first central markets were formed to meet a need for organized bidding..

Futures Trading Markets Article: Brief History

Features - Futures trading markets brief history how it got started. The first central markets were formed to meet a need for organized bidding and the need for forward-looking contracts and immediate delivery, this is the predecessor of our futures contracts we have in-place today.

The trading floor of the futures exchange, with all the shouting and signaling to buy or sell commodities does give the direct impression of chaos. In reality prior to the grain markets being established in the middle of the nineteenth century, the farmers would harvest their crops in the fall of the year and bring their crop to market.

The farmers would try to bring their crop to one of the major populated areas and transportation centers to sell to buyers. Seasonal glut was a major concern for the farmer as it drove prices to nearly nothing and at these low prices and the lack of storage, the grain the farmer brought to market was literally left to rot in the streets or was dumped in lakes streams and rivers. In the spring of the year because of lack of storage and the dumping of the grain futures in the fall, all of the products made with grains, corn or wheat became a expensive luxury not affordable for everyone. Now it was each buyer and sell for himself with no mechanism in-place to organize bidding competitive buying or selling of grain or other commodities. This is when the first central markets were formed to meet that need for organized bidding.

This brought the need for forward-looking contracts and immediate delivery, this is the predecessor of our futures contracts we have in-place today.
Because of the past the need to manage and organize bidding, price and risks is found in all modern business today. Today futures markets have become huge financial participants including gold futures, silver futures, oil futures, grain futures and major financial futures including bankers, bond dealers, farmers, merchants and speculators.

Today futures price and bidding are continuously transmitted or relayed around the world by satellite and other wireless devices. Everyone has can access the futures market in real time and at the same time.

The merchant in Wisconsin the farmer in Kansas an importer in Japan and the speculator in New York all have access to real time futures price and bidding at the same time.

The futures market bidding continues for the merchant, farmer, importer and speculator, and a set futures price for delivery of goods can be established, either by using a futures broker to buy or sell futures contracts or speculating on your own to buy or sell futures contracts. In the fast paced futures market, trading is very competitive for everyone including the futures investor but is very organized in one of the most competitive markets in the world.

If you decide to speculate either on your own or have a futures broker do it for you, with risk management set in place, the orders would be placed by phone or some other means of communication with your futures broker or investment adviser to buy or sell futures contracts.
Futures Trading Markets Brief History - Article Continued...

Futures Trading Markets Brief History - Article Continued...

The futures broker will either buy at the lowest futures price available or sell at the highest price available, the order then is sent to the futures trading pit and the order is executed by the futures floor broker.

As you watch the floor broker you will see signaling and shouting either to buy or sell at the best price possible.

If you see anyone take the opposite side of your futures trade it would suggest that it was another speculator or possibly a commercial hedger who believes that the price will go in the other direction. Don’t worry to much about that trade unless it is a big order and it is against you. In general it is good to get familiar with and understand who the futures market participants are, what they are doing and why there doing it, this will give you some advantage and insight as to what the futures market will do.

Article By: David L. - Level2StockQuotes.com