How You Can Profit by Learning Futures Trading Basics

Learning Futures Trading

Futures trading is a strategy that allows investors to hedge or speculate about what an asset will be worth at a specific time in the future. Because futures trading is leveraged, there is tremendous opportunity for large rewards. That also means futures trading carries a large risk for loss. Before starting to trade futures, it’s imperative that you have a comprehensive understanding of the risks involved. The best way to do that is to take a futures trading course.

What Is Futures Trading?

If you think a stock is undervalued, buy it. If you think it’s overvalued, short it. But what do you do if you think you know what the broader markets are going to do six months down the road? That’s where a futures trading course comes in.

When you buy a stock, you are purchasing an asset at a set price in the hopes that it will go up in price. Futures trading allows you to invest in commodities through a futures contract.

Futures are traded on futures exchanges around the world. In the United States, two of the main futures exchanges are the CME Group and the Commodities Exchange Center in New York.

A futures contract is an agreement to buy or sell an asset, usually a physical commodity, but also a stock index or financial instrument (like a bond) at a date in the future. While a stock represents a publicly traded company, commodities are raw, unprocessed materials of the global economy.

Commodities fall under four main headings: Energy (crude oil, heating oil, natural gas, coal, and gasoline), Metals (gold, silver, copper, platinum, palladium, and nickel), Livestock and Meat (lean hogs, pork bellies, live cattle, and feeder cattle), and Agriculture (including corn, wheat, milk, rice, cocoa, coffee, cotton, sugar, and frozen concentrated orange juice).

Because futures are traded in commodities that are in a raw, unprocessed state, you cannot engage in futures trading in flour. In addition to the main four commodities, you can also trade futures on stock indices and bonds.

How Futures Trading Works

To make money, traders speculate on the future price movement of the underlying commodity. If you are bullish, you would take a long futures position. If you are bearish, you would take a short position.

Unlike stocks, which you can hold forever, a futures contract has a set expiration date. After that date, the contract ceases to exist. Market direction and timing are of paramount importance with futures trading.

The worth of a futures contract itself has no inherent value. The price fluctuation comes from a secondary source. On top of typical supply/demand issues, a futures contract can fluctuate on economic data, geopolitical tensions, election results, and even the weather.

When trading futures, you secure a selling or buying price, the quantity, quality, and date of delivery. Longer-dated futures contracts are usually more expensive than shorter-dated contracts. Once you agree on the specifics, you are locked in.

When you buy a futures contract, you are obligated to purchase or sell the contract at the set price. This is the case regardless of whether the price of the underlying commodity has gone up or down while you are within the futures contract expiration timeframe.

Many investors like futures trading because it provides them with leverage. When buying or selling a futures contract, an investor does not need to pay for the entire contract. Sometimes, an investor only needs to put up 10% of the value to take a position. This way, you can take a larger position than if you purchased the underlying commodity outright.

While getting more for less opens the door for huge gains, it also has the reverse effect. If your contract goes in the opposite direction, there is a huge chance you could lose significantly more than your initial investment.

Learn-To-Trade.com: Toronto’s Leading Provider of Stock Market Training

As the leading and oldest provider of stock market training courses in Canada, Learn-To-Trade.com Inc. is led by licensed, industry professionals. Our extensive stock market and futures trading courses provide our members with the knowledge required to create a disciplinary approach to the financial markets and trade confidently in today’s complex and fast-paced stock world. On top of that, we provide a professional and supportive trading environment where members can interact with other traders and staff.

For more information on Learn-To-Trade.com Inc., including our stock market trading courses and Lifetime Membership, contact us today by phone at 416-510-5560 or by e-mail at info@learn-to-trade.com.

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George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members. Add me to your G+

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Don’t hesitate jump into it right now. You will be glad you did!

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I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

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Steven R

I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

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The past options and forex tutorials taught by George were very helpful. I find these tutorials invaluable for a busy person like myself. I was able to keep myself up to date and on track ready to continue the learning process. Thanks for all the help and keep up the great work.

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Shelley P

I took your course in 2008 and loved it. Since then I have been using what I learned at Learn-to-Trade to nicely supplement my pension income. Wanting a carefree type of trading, I have for the most part just sold options and made a monthly income which is a nice addition to my pension. I know I never would have made this kind of trading income without Learn-to-Trade. Thank you!

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Hi George, I just wanted to thank you again for the amazing work on the tutorials especially Options trading.   Prior to joining, I had underestimated the quality of the trainings but they certainly far exceeded my expectations. Only I wish I’d found you 5-10 years ago!
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