Futures trading is a type of investment that allows investors to speculate on the future price of an underlying asset. Futures contracts are standardised agreements that are traded on an exchange. Investors trade futures to take advantage of price changes in the underlying asset.
Futures Contracts Are Standardised
Futures contracts are standardised agreements that are traded on an exchange, meaning there is no need to negotiate the terms of the contract each time it is traded. The contract terms, including the price, quantity and delivery date, are all fixed in advance. It makes trading futures much easier and more efficient than other investments.
Traders Can Trade Futures Electronically
Futures can be traded electronically, which means that trades can be executed quickly and efficiently. It is a significant advantage for investors who want to take advantage of market movements as they happen.
Traders Can Trade Futures 24 Hours A Day
Futures can be traded 24 hours daily, so investors can take advantage of price changes worldwide. It is a significant advantage for global investors who want to trade in their time zone.
Futures Contracts Are Highly Leveraged
Futures contracts are highly leveraged, which means that investors can control a significant position with a small amount of capital. It is a significant advantage for investors who want to make the most of their capital.
Traders Can Use Futures To Hedge Risk
Traders can use futures to hedge risk, which means they can use them to protect an investment from adverse price movements. It is a significant advantage for investors who want to protect their portfolios from market volatility.
Futures Trading Is Regulated
Futures trading is regulated by the Australian Securities and Investments Commission (ASIC), which means it is a safe and secure investment. It is a significant advantage for investors who want to trade in a regulated environment.
Futures Contracts Are Liquid
Futures contracts are highly liquid, so they can be traded quickly and without delay. It is a significant advantage for investors who want to trade in a fast-moving market.
Traders Can Use Futures To Speculate On Price Movements
Futures can speculate on price movements, which means investors can make money from rising and falling prices. It is a significant advantage for investors who want to profit from market movements.
Traders Can Trade Futures Online
Futures can be traded online, meaning investors can trade from anywhere. It is a significant advantage for investors who want to trade from their homes or office.
Futures Trading Is A Flexible Investment
Futures trading is a flexible investment, allowing investors to choose when and how to trade. It is a significant advantage for investors who want to control their investment decisions.
Traders Can Trade Futures In A Managed Account
Traders can trade futures in a managed account, giving investors professional advice and assistance. It is a significant advantage for investors who want to trade with the help of an expert.
Traders Can Trade Futures In A Self-Directed Account
Futures can also be traded in a self-directed account, giving investors the freedom to make their own investment decisions. It is a significant advantage for investors who want to take control of their investment portfolio.
Risks Of Investing In Futures
Here are some risks of investing in futures.
Futures Contracts Are Complex
Futures contracts are complex financial instruments, and investors risk not understanding how they work, which is a significant risk for investors new to futures trading.
Futures Prices Can Be Volatile
Futures’ prices can be volatile, which means they can move up or down rapidly, which is a significant risk for investors unprepared for price movements.
Futures contracts can be illiquid
Futures contracts can be illiquid, so they may be challenging to sell, which is a significant risk for investors who need to sell their contracts quickly.
Leverage can lead to losses
Leverage can lead to losses, as investors can lose more money than they have invested, which is a significant risk for investors who use leverage to trade futures contracts.
Margin calls can lead to losses
Margin calls can lead to losses, as investors may be required to deposit more money to cover their positions, which is a significant risk for investors unprepared for margin calls.