Trading currencies, commodities, and stocks are the three main types of investments that individuals can earn money on. Futures day trading falls under the category of individual stock trading. There are many benefits to futures day trading and some dangers if done without proper guidance or analysis.
This article will discuss the basics of futures day trading for beginners, including what they are, how their values fluctuate, and the major players in this industry. It will then include advice for new traders on successfully getting started with futures day trading based on personal experience.
#1: Know what a futures contract is
The first thing people should know about futures is that it’s a contract written between two parties where one agrees to buy an asset at a specific price while the other agrees to sell. A futures contract includes the date, time, the asset being traded, quantity of assets, and price.
This means that since these contracts are written between two parties, each party takes on a specific risk depending on their position in the market. The person who agrees to sell should be careful because they also agree to buy the same amount at the originally agreed-upon price.
This means that if the sellers want to get out of their position before the contract is over, they could potentially lose money by not selling it immediately. On the other hand, for buyers, it’s essential not to only look at which direction prices are moving but also how fast. If prices go up quickly one day but drop by just as much overnight, then someone might be in a losing position.
#2: Futures trading is different from the stock market
People should know that futures trading is different from the stock market in many ways:
- They are typically much shorter contracts with expiration dates ranging from two days to three months, depending on the traded product. This means prices can move dramatically in just one day, so it’s essential to be aware of this when considering whether this particular investment strategy would be beneficial for you based on your goals and risk tolerance level.
- Futures trading doesn’t need brokers because operating an account can be done by yourself online without someone in between you and the rest of the world.
- There are no limits to how large a contract can grow, which opens up more opportunities and requires investors to be disciplined.
#3: The major players
Regarding whom the major players are in this industry, futures day traders can be categorized into two groups: commercial traders and non-commercial traders. Commercial traders include businesses that need a specific product to run or companies that want to hedge their position against fluctuations in prices. Non-commercial traders work for themselves and trade contracts daily, just like an investor with stocks using their own money.
The bottom line
Above all, remember that it is best to use your judgement when buying different trading options because the probability of your success hinges on making an informed choice.
Be wary, too, because there are fraudsters out there who are just waiting for you to take the bait so they can scam you off your money.
Don’t be fooled because not all sales pitches made for option contracts are true- many marketers hype things up so much just for the sake of making their sales fly through the roof.
It doesn’t mean that you should instantly invest. Instead, be sure to look into their background and also check what they’re offering is in line with your own preferences before buying anything at all.
In summary, when you choose different trading options through Saxo markets Singapore to invest in, it’s best to keep track of your personal needs and preferences.