Level2StockQuotes.com - Futures Trading Markets - The Floor Traders - Articles
Features futures trading floor traders what they do and how they are similar to the market maker and specialist but their function is not known and fully understood in futures trading...
Futures Trading Markets - The Floor Trader Article for Investors, Speculators and Hedgers...
Liquidity in the market, if a trade is placed and there is no speculator or hedger willing to take the other side of your order at or near the live futures market price. This is where the independent floor trader comes in and takes the chance, executes the trade opposite of yours, in the hopes that in seconds or minutes later they can sell at a profit. This type of trading is very similar to day-trading stocks, but with the futures markets the profit is tight and small, so trading futures knowing when to buy or sell futures and order execution is the key.
The floor trader who participates in trading futures or any stocks has no guarantees that they will make any profit on any trades they make. But in very competitive markets the floor trader can provide much needed liquidity in the market. Unlike the market maker or specialist, the floor trader is in no way obligated to take the opposite side of a trade / order or maintain liquidity in the market.
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.
Futures Trading Speculators:
To speculate in futures contracts oil futures, gold futures or other commodities, first you must decide with the help of your futures investment broker or investment advisor what futures to buy and when. If you decide to speculate in the futures markets, or any futures commodities, gold futures or oil futures contracts, only buy when you are confident in your analysis and decision that the futures commodity you are going to buy, will increase in value within the time frame you set with your futures broker. After you place your order to buy futures contracts, if someone takes the opposite side of your trade it possibly could be a hedger or another speculator who has a different opinion from your own as to what direction the futures contracts price will be.
Futures Trading Markets - The Floor Traders - Article Continued...
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Futures Trading Markets - The Floor Traders - Article Continued...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.