What is Future Trading?
An insight to predict future happenings is one of the biggest desire of human beings which is coming from past decades. People these days are more getting attracted toward trading. Estimating future pricing of certain assets and investing into them with a thought of earning profit is quite common.
Futures trading is quite common nowadays and buyers and sellers are making it more trendy. Talking in simple words, future trading is a kind of agreement signed between any buyer and a seller for any of the asset at certain fixed costing on the approved date. Here are the
Basic components of futures trading:
The Underlying asset:
The underlying asset plays an essential role in futures trading as it serves the transaction with the ‘hard value.’ Assets are many, ranging from traditional to exotic. Agricultural commodities, foreign currencies, energy products, precious metals and rate of interests are the major categories of tradition futures trading. The exotic ones cover temperature, snowfall, hurricanes etc. These futures trading contract is identifies using a specific coding system.
Date of Expiry:
With each futures trading contract, a specif date of expiry is mentioned. The date at which the open trading of the contract is closed is its expiry date. The entire price settlement of the contract is done after the date of expiry.
Price of Future Contract
Pricing of a futures trading contract is the actual amount of money required by an individual to purchase or sell the underlying asset ahead of the date of expiry. The projected value during the expiry of a future contract manages the current price of the contract.
Leverage is a double sided player capable of increasing profit and loss of any futures contract. The employment of leverage upon the marketplace is one of the key components f future trading. Trading of futures contracts is done in multiple quantities, known as lots. A lot is equivalent to a single contract and is the least increment at which futures can be sold or purchased.
The market place full of electronic and mechanical support is providing futures trading a healthy pace. Brokerage firms, regulatory bodies, exchanges, and separate traders play different roles in futures trading.
Types of Futures Traders
The capability of futures trading is to provide an individual a change of limiting risk factor by making proper investments or by sponsoring the future events prediction. Buying and selling of futures contracts is done by two kinds of people:
Individuals like producers, farmers, bankers are generally haedgers in futures contracts. Such people join futures trading with a goal of capital protection by elimination risk factors included.
Investors and traders are speculators of the futures trading. Speculators more rely on gaining capital by predicting future values of the coming events.
Above all, doesn’t matter who you are, whether hedger or speculator, futures trade end at either profit or loss. People always look for the mediums which can make them prosper and so is futures trading.