Futures trading OnlineFuturesContracts is a popular way to speculate on upcoming price movements. Traders can buy futures contracts on a wide variety of commodities, including oil, coffee, wheat and precious metals.

How They Work

The most common type of futures trade is hedging, which allows traders to protect unrealized profits or minimize losses. Hedging can be achieved with both long and short futures positions.

While hedgers are not typically interested in speculating on the price of the underlying commodity, they are often attracted to futures markets because of their liquidity and low margin requirements. For example, an airline company could use futures to hedge against large swings in the cost of jet fuel, or a natural gas producer can buy futures contracts to secure prices they expect for their pipelines.

The Benefits of Automated Trading Systems in Futures Trading

Unlike stock trading, which is risky without the benefit of leverage, futures traders can borrow money to gain exposure to larger assets with less capital. However, this also increases the risk that markets will move against you.

How to Learn About Futures

One of the first things a beginner should do is get a handle on their initial margin requirements, which is the amount of money they need to purchase or sell a futures contract. Once this has been secured, it is important to develop a strategy for entering and exiting positions and using risk management rules such as a stop loss order placed 5% below an entry price.