Guide to futures markets

For many traders, the futures market holds huge appeal and is a primary or first area of interest. However, before diving right in, it's important to get a good idea of some of the basics. Here, find a quick guide to these markets and how you'll be able to get involved.

In this market, you're dealing with derivatives. That's because what you're buying and selling isn't something you're holding in your hand beside perhaps a piece of paper. It's a derived value being tracked and traded.

The original futures were often agricultural related. That includes everything from grains to livestock. However, the markets have evolved quite a bit since then, of course. Today, the most popular markets are precious metals, such as gold, silver and platinum, as well as industrial metals, stock indexes, bonds, and oil.

Key points to remember about futures

One of the key points to remember with these contracts is that it's all about timing. Anything you're buying is finite. That means that it has a set expiration date, at which point the contract comes to a close. Therefore, finding the right mix of appropriate upfront value, versus timing and when you're projecting something to occur to maximize your return, is essential.

Another aspect to consider is what your actual investment will be, and how that impacts the moves you're making. You do not pay in full for a contract when you obtain it. To initiate a trade, you post a margin based on the overall value of the contract.

From there, you could potentially quickly rake in a substantial amount of profit based on gains made, still without ever having had to invest full value. The reverse is true though, that if the contract goes down in value, quick losses could destroy your entire investment, and you'd face the dreaded margin call.

Main categories 

Today, there are six main categories, with each category as a number of individual types of contracts. There's agriculture, with grains, livestock, dairy and forest, and then there's energy, with crude oil, coal, natural gas and heating oil.

Then you'll find equity indexes, including the S&P 500, NASDAQ 100, and foreign exchanges, as well as FX or forex markets, including Euro-Dollars, British Pounds-Dollars, Yen-Dollars, and Euro-Yean, for starters, and also interest rates, on treasures, money markets, and more. Last but not least you have the metals, as mentioned above, with precious metals including gold, platinum and silver, and base or industrial metals.

Of course, there's a great deal to learn and become familiar with for futures markets and trading. That includes the types of trades, including basis trades, spread trades and hedging, and how to succeed with each market. 

Related articles

Trading Emini Futures
Emini FuturesThe Emini futures is an electronically traded futures contract such as Emini S&P 500. Emini S&P 500 was started in September 1997 to attract the traders/investors who were...

Trading Stock Futures Market, Why Bother?
Stock futuresThe trading stock futures market is intriguing since many people make money trading in the stock market. What is the stock futures market? It's essentially just like the stock...

Futures contract defined
Futures contractA futures contract is a legal contract - that's lawfully binding, to buy a commodity or a financial instrument with a given date in the foreseeable future for a specified...

What all stock index futures failure have in common
Stock index futuresThis article about stock index futures is about what all futures failure have in common. What makes me the right person to write this article? I am the perfect person...

Futures trading software as essential tool for successful trading
Futures trading softwareFutures trading software allows financial investments like futures, as well as commodities, are quickly changing into a type of secondary career for many individuals. The best...

Futures market and trend trading
Futures marketFutures market: I was an idiot when I first started trading futures. Like most new traders who eventually lose all their money, I started off as a day trader. I was sitting in front...

Online futures trading that works
Online futures tradingOnline futures trading is known for taken eager traders, chewing them up and spitting them out. Hopefully, this article will save you from being another meal for...

Day trading futures and how to become a master of your trading strategy?
Day trading futuresMastering day trading futures is an article for people who have failed at futures trading. You know who you are? You are undoubtfully just like I got sucked into...

Commodity futures: How they work
Commodity futuresCommodity futures are a binding agreement to buy or sell a commodity at the specified date into the future at the very specific price. Much like the price of...

Forex futures trading
Forex futures tradingForex futures trading as you probably know by now is the trading of the currency of one country for the currency of another country. The thing about...

Futures trading tips for effectiveness and success
Futures tradingFutures trading provides numerous opportunities, but certain risks have to be taken in consideration, as well. The futures market can be...

Trading futures and mistakes to avoid
Trading futuresTrading futures - when traders think about striking it rich, they think about trading on the open market. After all, there are plenty of...

Stock futures trading instead of stocks
Stock futures tradingStock futures trading is lucrative if you know anything about the various trading markets. You probably know that trading stock futures in the futures market are one of the hottest...

Futures option trading without the high outlay of funds
Futures option tradingConsider futures option trading if you want to make money in the futures market, but don't have a lot of cash to spare. Trading options, whether or otherwise, has always...

Commodity futures trading is not a get-rich-quick scheme
Commodity futures tradingIn commodity futures trading, you can make a substantial amount of money and you can become rich in the process, but it isn't a get-rich-quick scheme that you take...