Perhaps you’re nearing retirement.
Maybe you’re looking to supplement your income and ease away from your full-time job.
Or you’re just looking for a bit of true diversification in your portfolio.
How about this? You see the market CRASHING and you’re wondering if you can grab some explosive gains, while protecting what you already have.
If any of these scenarios describes you… Then you’ve come to the right place.
Getting started, especially if you’re new to futures, can be a daunting task.
For millions of stock investors… Even forex traders… The questions around futures are big, and maybe even a bit scary.
Let’s get started with the basics.
First: What Even Are Futures?
Simply put, futures are financial instruments that allow you to speculate on the future price of a market or commodity. That’s right, the future price.
Do you think it will be a tad warm in Florida in the middle of July?
Then you can trade futures.
Is it a safe bet that there will be increased demand for natural gas in the winter to heat homes in Alaska?
Then you can trade futures.
And the above questions actually require far more analysis than you really need to trade futures.
Here’s how it works… the futures market can be seen as an evolution of the forward market. In it, participants commit to buy or sell a certain amount of an asset at a stipulated price for settlement at a future date.
You can buy or sell contracts for just about anything. Crude Oil, Soy Beans, Cattle. Even financial markets… the S&P 500, the Dow Jones… even currencies like the Dollar or the Yen.
A futures trade is like an agreement, a contract… you agree to buy or sell a certain commodity, at a certain price, at a future point in time.
They all work the same.
Contracts are tied to a date in the future. And price fluctuates every second, minute, hour, and day… depending on what’s happening with the underlying asset.
War in the winter? Gas prices go up.
GDP of a country falls and their unemployment rates go up? The value of their currency will fall.
These are all events that you can take advantage of… simply by buying or selling the futures contracts tied to these moments or markets.
Now that you know what they are, let’s see if it’s a good idea to invest in futures.
Second: Is Trading Futures A Good Idea?
Look at it this way. If your stock portfolio is your regular gasoline… the stuff you use to fuel the pontoon boat and minivan… Futures will be rocket fuel for your investing.
Futures instruments allow you to trade far above the capital that’s actually in your account, thanks to leverage. This means that when you trade, you can do so with a relatively small amount of capital — and generate outsized gains.
Think of it this way. You can trade like you have $100,000 in your account… with less than $5,000. And more importantly, you have the potential to generate far greater profits… a lot faster… than you normally would with conventional stocks.
Just like any form of investing, there are pros and cons that have to be weighed. Let’s get your evaluation started with a few of our own.
Pros
Cons
Finally: How Do You Make Money Trading Futures?
There are all kinds of benefits to trading futures… not to mention ways to generate steady profit.
For a bit of perspective, futures trading strategies are usually split into three main facets: Hedging, Speculation, and Arbitrage.
Hedging
What: Hedging as a strategy to avoid future losses. Seeking to protect the value of the asset, the investor carries out a transaction limiting its price. There are three main types of hedging: currency, commodities, and equities.
Who: Farmers use futures to hedge the price of the crop they are farming or the livestock they are getting ready to sell. This provides downside protection, in the event that price goes against them while they are trying to sell.
What: Speculation works differently from hedging. Here, the intention is not freezing a price and protecting yourself, but rather achieving short-term profit. By ‘short-term’ we usually mean profits from price fluctuations that take place over a matter of minutes.
Before signing your trading contract on the dotted line, so to speak, it’s important to understand the different futures trading strategies and which one you should use.
Who: Everyday market participants… you… me… any adult with a bank account can speculate on price action. And they can do it in conjunction with market events… like interest rate adjustments… or WORLD EVENTS… like conflict or natural disaster.
Arbitrage
What: This is when you simultaneously buy and sell a position, usually in two different exchanges to take advantage of a price difference. For example, Soy Beans are selling for $15 per contract in the US exchange, but they are also selling for $16 per contract in London. A trader can simultaneously buy the $15 contract and sell the $16 contract and bag the difference.
Who: Institutions have arbitrage desks and they use these desks to take advantage of irregularities in pricing… or latency for pricing to catch up to market events. They have enough capital to carry both positions simultaneously, and they can wait out losing positions much longer than any everyday trader.
Getting Started…
So now you know enough to look further… possibly open an account or try your hand at trading futures.
What’s next?
Start with a crash course and a few tools. If you’re like millions of other traders, simply interested in making a few extra bucks (and potentially a lot more), then you have plenty to learn.
But the good news is that you can earn… While you learn.
Get started now, by simply visiting our site and choosing a beginner course that is right for you!