Futures trading certainly requires more industry knowledge than such investing in gold. Commodity futures contracts are a chapter in themselves. If you want to get into investing yourself, you can use a broker or open your own investment account. It depends on how proficient you are. Futures contracts are linked to an underlying asset, which takes myriad forms.
- Natural gas
- Oil
- Gold
We could certainly continue in a similar vein. Underlying assets include, for example bonds, stocks, but also individual currencies. Futures contracts are traded on selected exchanges.
Capitalize on the decline in value
Futures trading is interesting in that you can make a profit even if the value of the contract falls. It depends on your trading strategy. This segment is associated with high leverage, so you can make money even on losses. On the other hand, you can lose a lot of money. Therefore, knowledge of this business is required. You will often come across terms like margin call and many others.
Futures Trading - Advantages and Disadvantages
If you decide to trade futures, you should be aware of the pros and cons of doing so. After all it is a risky investmentwhich can bring significant profits but also significant losses. We will tell you more through the questions and answers below.
It's leverage. In essence, you are playing with the underlying commodity and its development.
Yes, because you are not buying a specific commodity in full, but you are trading contracts.
Both short and long positions can be used when trading futures.
Prepare for the fact that futures may be low volatility. Unless you have experience, this feature becomes essentially a risk.
Yes. For example, if the market goes against you. Before you get a chance to close the position, you lose your entire initial investment. That's futures trading in a nutshell.