Futures Trading 2018: What is it & How to Trade | Beginners Guide

The Futures trading can be defined as a contract between two parties (buyer and seller), to buy and sell a particular asset at a fixed price and on a very specific date. Though a trading trend today, futures contracts were created to aid farmers when crop prices fluctuated, during the period between planting and harvesting. This grew into a trend for traders to speculate on and predict an asset's profit/loss. 

What are Futures Trading?

Futures are essentially a derivative - their value is derived from another commodity's price movements. Only the instrument's price will affect the value of a derivative, and it doesn't have an inherent value by default. Futures can be traded by anticipating the instrument's price movements. This is done by going long (buying) or going short (selling). Several traders speculate on this rise/fall and try to profit from the changing price of the contract. Right from eggs, to precious metals - futures contracts exist for several commodities! 

Futures Trading 2018: How to Do it?
How to do Futures Trading in Vietnam

Futures are unlike other financial assets, solely because of their lack of inherent value. Additionally, a particular commodity can't be speculated for a long time because each futures contract has an expiration date. This makes futures trading a very sophisticated and volatile field to delve in. 

Basics of Futures Trading in 2018:

Futures trading are more than just a means to hedge; it is a provision to speculate on financial assets. The risks involved are very high - while the profits you make might just put you at a breakeven position, the losses will leave you tumbling! Intense amounts of research are required to ensure a healthy trade in futures. Several traders consider taking help from a professional broker when it comes to futures, because of the immense risks involved and the high levels of precision needed to avoid losses.

While trading futures, there is always an underlying element of risk. The second you decide to take a risk, you must be ready to sacrifice all your investments! It has happened on one too many occasions where the losses suffered were more than the investments put in. Futures brokers provide leverage, since buying a commodity is not financially doable; this leverage can be your downfall if you don't trade carefully! Only trade with your risk capital. Incurring leveraged losses will leave you drained of funds in no time! Only utilize money that you can afford to risk losing. 

Tips for Trading Futures in 2018:

1) Study the Asset Completely: The crux of futures trading lies in understanding the underlying asset completely. Traders fail to realize it isn't just the asset that's on the line; it's the accompanying factors as well! Handpick the instruments/commodities you think will move as you predict, then go on to study the factors that affect its movements. For example, if you're a wheat futures trader, just knowing the harvest duration won't help. You must know who the prominent wheat-buyers are, how the weather affects the crop market and the price patterns of all previous years. These are some of the various governing factors for a crop. Similarly, for other commodities, observe and research on the factors that will affect its presence in the market and govern how long it is on the top. 

2) Move on Your Own: Futures trading may look hard to conduct, but with ample research, you can definitely profit! Trading independently has a number of advantages; you can trade at your time, devise your own trading strategy, and other than the facilitation fee, there won't be a dime to pay anyone! However, this requires immense responsibility and attentiveness to pull off. Right from managing funds, to researching, to devising a strong plan - the entire ordeal will have to be handled by you and you alone! This hasn't prevented traders from pursuing it. Several traders are solo players in futures and are more than just successful at it.

3) Implement Stop-losses: Futures holds a lot of liquidity, which will work against you in no time. Profits always look attractive from the distance, but the closer you go the more you realize - the path to profiting in futures is laden with risks! Several traders choose to stick to losing positions out of pride, or hoping that the market will turn in their favor! Avoid such careless acts. An amazing way to keep losses in check without pressurizing yourself each minute is by implementing a stop-loss before hand. Stop-losses are mechanisms that are hugely beneficial in trading. Implementing a stop-loss will automatically withdraw your position once a losing trend is spotted or a certain loss amount is met. Risk management and loss minimization make up a huge part of your trading strategy.

Futures are a highly lucrative field with immense prospects of profits. However, the volatile nature of futures ecosystem makes it very liable! Assisted by WesternFX - the best at futures trading in Vietnam, you will not just learn, but excel in your ventures! Call us today to hire us.

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