FUTURES TRADING GUIDE

     Futures-trading involves speculative investment on the price of a commodity rising or falling in the future. Some commodities traded in the futures market are physical products like petrochemicals, precious & industrial metals, agricultural produce like grains, meats, sugar.
Other tradable commodities involve currencies, index futures & financial/interest futures. There are dozens of commodity exchanges around the world with thousands of members who support the exchanges by paying dues & assessments.
     Private investors can purchase futures through a brokerage company who have agreements with the members of the exchanges One advantage of trading in futures is that investors trade on "margins". To purchase a contract (an agreement to buy or sell a commodity on or before a specified date) an investor need only risk a fraction of the contract value as his investment covers the "margin". If the margin is set at 10%, a $2000 deposit will allow the trader to acquire a $20,000 future which will give a far greater profit if the investor predicted the commodity movement correctly. Potential losses are typically protected by a "stop-loss order" which will limit the deficit to the original deposit amount. If an investor thinks the value of a commodity will rise he will "go long" and raise a futures contract to purchase a quantity of the commodity, in order to re-sell it once the price rise has taken place. If an investor thinks a commodity will fall, the will raise a contract to sell a quantity of the commodity, wait for the market to drop then "buy back" the commodity to settle the contract & release the profit.