What Are The Fundamentals Of Futures And How To Trade In Futures?

Futures can be defined as “an agreement between two parties – a buyer and a seller. The buyer agrees to purchase from the seller a set number of an index or shares a specific period of time in the future for a pre-decided price.” When the actual transaction is carried out, all the particulars are agreed upon between the two parties.

The futures contracts can be freely traded on share market exchanges as the common criteria like contract sizes and expiry dates are standardized.

A futures trading is done securely as buyers will not know who the seller is and vice versa.

Further, the stock exchange guarantees every such futures contract. Futures contracts are made out of diverse assets – stocks, indices, currency pairs, commodities, and many more.

Investing in futures and options is a risky trade. Everyone cannot carry out future trading, and the person entering this stock trading needs thorough knowledge about how the market and the contracts work.

When you are ready to enter after understanding the market fully and the risks involved in it, there are three ways in which you can carry out your trade.

Carry Out The Trade Yourself:

Necessary market research can be done to maintain margins, manage funds, and order trades. This manner has the maximum risk, and a lot of time needs to be dedicated to sorting out the workings of the market. On the other hand, the satisfaction is entirely yours when the rains come.

Open A Managed Account

Similar to an equity account used for the stock market, you can open a managed account where the control is with your broker to trade on your behalf. The broker is a professional who will be able to make informed decisions. On the other hand, it is your accountability for taking any contract call and losses acquired.

Join A Community Of Members

Offering the least risk in the futures market, you can choose a group of commodities you can invest in by joining a community of members. In this group, funds are jointly traded as one. This needs to be administered by an experienced broker as overall risks related to the futures market still exist.