Do you know how trade futures can be a profitable way of generating returns? Buying and selling futures is the finest way to hedge your minimum losses and portfolio. Similar to other hypothetical markets, It is not suitable for everyone, mainly for the risk advisor. However, for traders searching for quick-moving trading opportunities and ready to bear risk, futures trading is the most prominent option for you. But before that, you need to understand the fundamentals of futures trading. 

What is Future trading, and how does it works?

A futures contract is a derivative or a financial asset which is a financial agreement between two parties in which buyer and seller are ready to transact commodities or assets at a predetermined price at a fixed date in the future. This contract is made for a future transaction which is known as Futures. Most futures do not result in the real delivery of the decided commodity or security. Most of the futures contracts are completely hypothetical. That is why it’s an excellent chance to earn profit and security from the risk. Generally, it may not be used to receive delivery of the physical security and goods. Several types of buying and selling futures contracts are available in the market, few of them are:

  • Metals 
  • Softs
  • Forest Livestock 
  • Internet Rates
  • Currency
  • Stocks Index
  • Energy
  • Grains

How to perform buying and selling futures?

Before trading futures, trading needs to consider a few factors: Leverage, Diversification, Liquidity, and others. Here we discuss these factors so that you can learn how to trade futures?

  • Leverage: This factor is most important and necessary to maintain while trading futures because it allows you to perform large trades at small amounts of capital. It provides you with the strength to generate good returns, but you must be aware that due to this, you can also bear significant losses. 
  • Liquidity : The futures market is one of the highly active markets, which consists of a huge number of traders, generally in high volume contracts. Due to this, your entry and exit of trade become easy. For highly obscure agreements that consist of low volume, there should be liquidity concerns. 
  • Hedging : If you already hold an existing position in stocks and commodities, You can utilize future contacts to secure held profit or reduce your losses. This offers an alternative to getting an exit position smoothly. The best example of this is hedging a long portfolio with a short position. 
  • Diversification : Buying and selling futures contracts provides you with several options of investment such as energy, oil, gold or several metals, interest rates, index, grains, livestock, and various others 
  • After Hours Market: Traders can trade in the future market at any time throughout the day. Including future markets show the opening condition of the underlying market, like investors estimate the stock market up and down on the basis of stock index futures. 

Create an account to trade futures

For buying and selling futures, you need to open an account on one of the trusted broker’s websites. Some leading Futures brokers are ROinvesting and HFTrading. These brokers offer three types of accounts as Gold, Silver, and Platinum accounts. You can pick anyone as per your requirements. You can also enjoy commission free trading on their platform. But while doing futures trading, investors need to be careful with leverage. 

Pick a Trading Strategy. 

To become an efficient futures trader, you need to develop, and stability at a particular strategy is necessary. Investors have to develop a strategy based on fundamental and technical analysis. Traders can do technical analysis based on statistics created by the market activity like volume, past price, and various other variables. Mostly, professional traders use charting and other financial technologies. 

Whereas fundamental analysis targets calculating an investment’s value depend on financial, economic, and federal Reserve data. Most of the investors use a merge of both technical and fundamental analysis. 

For traders who prefer technical analysis, you get a dual-layer proposition, which means you have to check technical data for both the associated futures contracts and absolute security or commodity. 

The easiest way to develop a trading strategy, traders can open an account on a broker’s website, which offers several types of trading tools to their clients. Though broker’s provide tools, you can efficiently perform research work. Buying and selling futures based on research work you did before purchasing any assets. 

Decide Whether to go short or long.

Going long or short is an essential part of trading. Going short means that you are predicting the price value of a purchased asset will decrease in the future, whereas going long means that you are forecasting that the price value of a security will increase in the future. 

Conclusion:

Future market is a highly active market. Traders can trade futures contracts for making money quickly. Buying and selling futures should be done by opening an account on the broker’s website. Collect complete information on how futures trading works. Check here step by step buying and selling of futures contracts.