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Futures Trading Speculators and Articles for Investors, Going Long or Short...
Speculators in the futures markets are firms, manufactures and companies that are trying to predict or anticipate what futures contracts prices will rise or fall and when this will happen, and profit from it. The main reason many manufacturers or companies hedge is to profit, and to offset any higher costs of production going forward.
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.
Trading futures markets: Going Long Someone who researched the futures markets on their own or with an investment adviser and is confident in their decision to buy futures contracts, with the anticipation that later you will be able to sell the futures contracts at a higher price. This is known as going long.
Trading futures markets: Going Short Going short is the opposite of going long, here your are anticipating that the futures contracts will go down or drop in price and you would buy back at the lower price to cover your short. The futures price difference from when you executed your short trade and when you bought back at the lower price is your profit. If the futures contracts price increased in value from the time you executed the short trade until you covered or bought back, you would have a loss.
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.
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.
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Futures Trading Markets - Speculators 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.
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.
Futures Trading Hedgers:
The principle of hedgers is simple but can be somewhat complex. In this article we attempt to clarify futures hedgers and what benefit they have. The hedgers in the futures market buy and sell futures contracts mainly to establish a price level many weeks or even months in advance, this is done to establish a know futures price level for goods they later intend to buy or sell in the cash market or bond market. Some hedgers use the futures market to lock in a price that is acceptable somewhere between their buy and sell price, this is a margin between the two prices.