Day Traders, Penny Stocks, Stock Options, Futures and Forex

The futures market offers the opportunistic investor the option of using small amounts of their own money to control large amounts of products, including gold, currencies, and agricultural commodities.

A futures contract is a legally binding contract to deliver, if you are selling, or to take delivery, if you are buying, of a specific commodity, index, bond, or currency at a predetermined date or price. A futures contract can include everything from a standard size amount of wheat, oil, or a country's currency. The amount and date of delivery of the contract are specified, though in almost all cases delivery is not taken as contracts are bought and sold for speculative or hedging purposes.

Futures are utilized by both those who use the actual commodity and by investors. For example, in May a farmer plants some corn, but doesn't know what corn will be selling for in November. He can sell a futures contract for November and "lock in" the future selling price today. On the other hand investors can buy a futures contract if they believe the price of a security is going to appreciate, or they can sell a futures contract if they believe the price of a security is going to decline.

Futures are often thought of in the same category as options. While they are both derivatives, in that they derive their value from some base security, there is one very important difference. While options give the right, but not the obligation to buy or sell the underlying security, a futures contract is a legally binding obligation to buy or sell that same commodity. Thus, while options limit your loss to the price paid for that option, futures trading could lead to a loss of your entire investment and more to meet that obligation.

Another difference between the futures and the equities markets involves the use of word margin. Although the contract sizes for currencies are large (often the equivalent of over $100,000 for a single contract), an investor does not have to buy or sell a full contract. Rather, a margin deposit on the contract is maintained, which is actually a "good faith" amount of money to ensure your obligations to the full amount of the futures contract. Minimum margin requirements vary by broker, but are typically only a fraction of the contract's total value, and are not related to the actual price of the contract involved.

Futures trades must be made through futures brokers, who operate both full-service and discount operations, and may be related to the stock brokerage that you already deal with. However, popular discount stockbrokers do not handle futures contracts.

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Forex traders worldwide trade actively around the clock, exchanging $1.9 trillion daily. Forex, Futures and Options trading has large potential rewards, but also large potential risk. When trading currency futures, traders have one margin rate for day trades and another for overnight positions. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets.

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"Futures trading could lead to a loss of your entire investment and more to meet that obligation". It's really hard to trade Futures, isn't it? How to become a profitable trader??

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Futures Trading | Investing Commodity | Crude Oil Price

for anyone new to trading of instruments more complex than equities, it is always good to pick up a few books on the topics before risking real money. Wiley is a great publisher of financial education books, and are all priced pretty reasonable.

Books by professionals are the only route for learning. trying to figure everything on your own hopping around the internet can lead to a lot of misinformation

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