Futures Trading Education – Learn Futures Trading Basics

Futures Trading Education – Futures Trading Basics
Futures trading started in the 19th century and it is originated from the agriculture market. During that time, the agricultural industry was having a super boom, more and more people get involved in this industry.As a result, the demand and supply were not always at a balance point. In order to protect the farmers, they started to sell contracts to provide agricultural products at a future date. By doing so, they were able to predict the market needs and also able to stabilize the demand and supply during off seasons.

Today’s futures market has extended beyond agriculture products. It has become a worldwide market for all kinds of products, commodities, assets and underlying assets. Some of the most common trading products are agricultural commodities like crude oil, corn and soy beans,  manufactured goods, and financial tools such as treasury bonds and currencies.

When speculators play in futures market, it’s the contract they trade that holds more importance than the actual commodity for which they trade. The value of contracts changes continuously, throughout the day as speculations change on the value of commodity.

Understanding Futures Trading

Every futures contract comprises of a buyer and seller. The former takes a long position while the latter takes a short position. The contract stipulates a buying price, a particular quantity of commodity, and its delivery date. The speculators make profit from the daily fluctuations in the futures trading market. If they speculate a rise in price, they will then buy from the buyer or called buy long. While when they speculate a fall in price, they buy short or in other words, they buy from the seller.

Accounts in futures trading are settled daily. When the contract period expires, the contract gets settled itself. The final contract buyer, at this time, can take delivery of his commodity. Again, he or she has the choice to start the entire process from square one by creating a new contract. The newly created futures contract will be traded again. Therefore it is correct to say that futures trading market is a no ending market, as long as there are buyer and seller, the market will continue to trade.