How to Trade Futures

Submitted by Stock Market News on 26 May, 2011 - 16:12

How to Trade Futures

Futures is a popular day trading contract. It enables traders to buy a certain quantity of an asset for a predetermined price date and price. However, unlike in options, the traders are obligated to buy and sell. Futures traders have to follow the terms and conditions of a contract.

Futures can be traded in both directions, whether up or down. If the market moves upwards, traders will make a long trade. This means that they will enter by buying a contract and exit by selling. On the other hand, if the market moves in the opposite direction, traders will do a short trade instead. They will enter the trade to sell a contract and exit by buying one.

This process applies to all trades, even in multiple contracts. The main is difference is that there may be separate entries and exits. For example, if a trader has five contracts, he can enter with 4 different prices, and then exited at one price or the opposite. Traders are only required to enter and exit in order for the transaction to be completed.

Traders can earn profit regardless of what the direction of the market is, that's why futures are quite popular even though they are highly speculative in nature. In this market, traders pay attention to movement rather than direction.

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