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Futures Trading Markets - Introduction - Features a 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.
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Futures Trading Markets - Introduction:
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Futures Trading Markets Introduction:
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.

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: 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.

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.

Article By: David L. Lawrence
Note: The data, futures trading information and articles is for informational purposes only and provide answers to some of the questions you might have regarding investing in the futures market. The decision to invest in commodities futures trading should only be made after your consultation with an investment adviser or your futures trading broker.