Futures trading may be unlike trading in the stock market in many ways. Futures trading deals essentially with trade in financial contracts of a certain asset or commodity. In a way, it can be compared to options trading in that both deal with contracts for buying or selling certain assets or commodities at a future time. The difference between them is that options give its holder mainly the right to buy or sell an asset upon expiration while a futures holder is obligated to fulfill the terms stated in the contract.

Futures Trading And Speculation

Futures trading mainly deals with speculating how a certain asset or commodity might turn out in the future. A futures trader deals with trying to determine how certain assets and commodities will turn out at a certain point in the future and then tend to act upon making trades in futures contracts based on that speculation. There is money to be made in futures trading. But there might also be a relatively high level of risk involved that may result in considerable losses for mistakes. Futures trading requires a great deal of thought and preparation before one may try to engage in it.

Getting Ready

When deciding to get into futures trading, one should realize that it is a “zero sum game”- there is bound to be a loser for every winner. Risks are there to derail any amount of success anytime. But just like any other types of trade, there are also rules that successful futures traders follow.

  • Right Trading Plan. A futures trader should have the proper trading techniques and methods in place that would be effectively in a futures market.
  • Effective Money Management. Since futures is a long term trading game, how a trader can effectively manage his capital would work wonders in terms of achieving success in futures trading.
  • Avoid Emotional Trading. Futures trading success depends on how one stays on course when following a trading plan. This involves a control over emotions when the going may get tough.