Futures are a great market to be involved with. What exactly are they? These are progressive financial contracts that create a willing-buyer-willing-seller space with a predetermined future date and price. As the saying goes, “You will only be as good as the products you trade.” Not everything is worth going into active trade with, especially the low-quality products in the financial market out there. With futures, one can speculate on the trajectory of a commodity, security, or instrument of financial value. Isn’t that a great market to be involved in?
There are several reasons why futures are a superior product, industry, and craft. Its trade is well-regulated by the Commodities Futures Trading Commission, an independent government agency. As a trader, you can be assured of protection from fraud, price manipulation, and any other malpractice. Try and compare the futures market to other markets. Imagine how chaotic the Forex market is, with all the exchanges which sometimes end up in harmful and predatory activity. Some exchanges actively trade against their clients! That type of mishandling doesn’t happen with futures.
Another advantage with futures is that they offer sufficient leverage, or rather security in the transaction. In short, one can control a larger amount of assets for a smaller amount of one’s capital. This can be as low as 10% of the contract value, which acts as collateral. You don’t have to deposit a considerable deposit to be able to trade actively. In other markets, like the stock market, you would have to have at least $25,000 kept in the account to participate.
Furthermore, you would end up using a lot of that money at a go because of a lack of leverage. However, when it comes to the futures market, one has enough leverage to trade without actively having that capital, as mentioned above. Also, execution and commission costs are comparatively low, as much as 0.5! Of course, it all depends on the extent of service that one receives from the broker.
Now that there is a sufficient amount of leverage, one does not have to scan through the market daily, looking for what will be moving. You only need to trade one futures product, which will give you enough range to earn consistently, day in and day out. Often Forex traders have to keep on toes on which products are moving. Quite tasking! On the other hand, with futures and the good leverage they have, they don’t have to move that much to earn well from them. The liquidity of futures, availability of buyers and sellers means that one can place orders quickly.
The futures market is also transparent. In the world of trading, there are often lots of unrelated exchanges that are not visibly understood. Take a look at the same forex pair; one may end up looking at different things. The price may be the same, but when scrutinized deeper, the product may be different. However, in the futures market, all transactions and exchanges have to clear through the CME. This one centralized exchange where everything goes through provides transparency where information is available to everyone in real-time.
There are also downsides in trading futures. One major one is that since futures trade in contract, one is just enough to start trading. Sounds like an advantage, right? Wait till you find out how big that one contract is. Let’s consider the S&P 500; the E-mini S&P, one of the smallest ones, has a value of approximately $170,000. This makes buying stock look like peanuts. You either jump into the deep end or don’t swim at all. There’s no middle ground! However, the CME group has recently released some micro-contracts to allow traders to access once unavailable contracts at a tenth of their size. This made active trading in futures an actual reality for a lot of users with small accounts. At least you won’t be exposed to predatory practices in other financial markets, even with smaller capital. Futures now have a low barrier for entry, which is quite attractive.
When trading financial markets actively, whether it is forex, crypto, stocks, or any other options, check out the futures market. With a very nominal amount of money, try setting up an account, for example, with AMP Futures. Get acquainted with the simulated environment and see if it can benefit you or not. Do your due diligence before trading and strategize, as in any financial market. Understand both the advantages of futures as explained and also the risks involved. From experience, most traders say that of all the products mentioned, futures are the most superior products they’ve traded. Most move off of common ones like forex into the futures market. Futures truly are outstanding and appeal to all kinds of investors.