Futures contract is basically the agreement between a seller and the buyer. This works when the two parties agreed to sell or buy assets at a given time and price. Every single future contract is representing specific amount of given commodity or security.
As a matter of fact, the most traded commodity futures contract that futures trading brokers take advantage on is crude oil which has contract unit of at least 1000 barrels. But with corns however, each futures contract of it is being represented as 5000 bushels or around 127 metric tons. It looks like confusing at first but as you take time to know more about futures trading in this page, you’ll get to understand it sooner or later.
The fact is, helping farmers to hedge against the unforeseen changes in cost of crops between planting season and when it can be harvested and supplied to market is the initial objective of future contracts. While producers such as farmers as well as consumers keep utilizing the best futures trading system in hedging against the potential risks, then both traders and investors too will be using contracts mainly for speculation. In soon time, they are going to make profits by betting on the asset’s direction where they think it’ll move. Try visiting this site if you wish to find out more information about this.
While futures contracts are centered on agricultural commodities similar to grains and livestock, the future trading financial services do include contracts that are linked to other types of assets such as precious metals like gold, industrial metals like aluminum, energy in forms of oil, bonds like treasury bonds and stocks. All of these contracts have standardized agreements that are trading on futures exchanges worldwide.
Needless to say, you have better chances of becoming successful if you know more info regarding the basics of futures commodities and contracts. With any kind of trading done online, there are several factors that must be taken into consideration. These are exactly what you would learn in the next paragraphs, which can be very useful when doing futures trading or using automated futures trading system.
Capital requirements – in trading futures contract, you have to make deposit to your futures trading account as initial investment. Depending on the platform you’re using, you must read how much the minimum investment should take.
Leverage – this depends mostly on futures contract that you’re trading as well as the contract value.
Liquidity – this will rely on the traded futures contract.
Volatility – you are going to see some decent volatility in futures market that have high leverage allowing you to make big profits.
You can learn more about futures trading by checking out Wisdom Trading.