The Basics of Futures Trading

futures trading

Futures trading is a way to profit from a changing market without owning the underlying asset. It involves the trading of contracts to buy or sell a particular asset (such as commodities, bonds, or even bitcoin) by an agreed-upon date.

The Futures Marketplace

Unlike securities such as stocks or bonds, futures are standardized contracts. Each contract is based on a specific benchmark, such as the price of a barrel of oil or a certain purity of metal. More info


Traders use leverage to magnify small price changes and maximize profits or minimize losses. This is especially useful in speculative markets like futures, where the risk of failure to execute can wipe out your gains or cause you to lose all your money.

The History of Futures Trading and Its Evolution

Before you can trade futures, you must arrange for a margin deposit of a specified amount. This can be between 5 and 10 percent of the value of your entire position.

You can also opt for a spread strategy, which allows you to trade multiple futures contracts with one broker. This is a good option for beginners because it reduces the risk of losing money on multiple trades.


Many traders use futures to hedge their exposure to a commodity or stock. For example, a long-term stock investor may short-sell a futures contract to balance their long position and protect unrealized profits. This approach can be beneficial, but it requires a lot of knowledge about the futures market and your specific investment objectives.

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