As an introduction to futures trading, it involves a contract that is standardised, transferable and exchange-traded. It needs a commodity, bond, currency or stock index to be placed at a specified price on a specified future date. In short, it concerns a speculation on the future markets price on commodities such as corn, coffee and sugar and also other bonds and stocks. At the same time, you will not exactly buy or own anything as it only bet on a future price direction. When there are terms like ‘buy’ or ‘sell’, it is to indicate the direction you expect the future prices to turn out to be.
Futures trading are also what appear to be forward contracts. It represents a pledge to make transaction at a future date. For payment to occur, there are a margin requirement that need to be settled daily. To close it, you will have to make offset trade, take delivery of commodities or exchange it.
In this introduction to futures trading, there should be much to stress on the risks that involve in it. This is a type of trading that is best for the advanced investors and experienced individuals. It must be seen as a business to be managed with analysis of reasonable returns. If an individual takes it as a get-rich-scheme, this attitude of just want to see profit but not expecting losses, will spell out more troubles. In fact, losses will be more with irrational and go ahead to trade without much in depth study of how the futures markets are. Therefore it is good that one learns up the knowledge and tips to get involved in this. Risks will always be there. But if you have gain knowledge of the ways of how it works and start off slowly, you might reap a good result from it.