Check Out The Infographic Version Of This Article : What is futures trading and the 7 must know advantages of trading futures

Futures trading has gained significant importance among traders and has revolutionized the currency markets since its introduction. The exposure a trader could gain and the opportunities to reap money seem to be enormous when trading in futures. It offers a wide variety of instrument choices for the trader which includes currencies, stocks, indexes and commodities. The extra benefits one could get from futures trading has made it widely popular among the trading community.

HOW FUTURES TRADING WORKS?

The question of “How To Trade Futures?” pops up every now and then bringing out the lack of knowledge and uncertainty among the traders. Futures trading offers greater chances for traders to make good profits. It is an agreement between a buyer and a seller where the buyer purchases the required number of goods and sets an expiry date on which the goods are sold at live market prices. The deal may either end up in profit or loss. However, when one is able to understand the futures trading strategies, the possibilities of increasing your profit becomes higher. Here are 7 advantages which explain why you should prefer futures over the other trading systems.

• 1. High leverage

     It is very clear that high leverage is risk disguised in its positive form. But again, if you do thorough groundwork before you trade in futures with any of the financial instruments, the high leverage could be an excellent opportunity in helping you to achieve maximum profits for your investment.

  2. High liquidity

     Whether it be a day trade or long-term contracts, there are buyers and sellers available at any point of time and in any geographical location. So, there wouldn’t exist a situation where you have to worry about your stocks piling up. You can buy or sell commodities or stocks at any moment that you think is appropriate.

  3. Purely paper transactions

     Futures trading does not involve trading with the physical commodities. All futures contracts that happen within the market environment are usually paper transactions, thus eliminating fuss and promoting assurance within the trading community.

  4. Low commissions and execution costs

     Commission costs charged on Futures trading are very low when compared to other instruments and they come into effect only after the position is closed. The cost varies amongst brokerages depending upon the services provided.

  5. Manipulate the chances of earning profits

     A trader who has the expertise, knowledge and years of experience in trading will be capable of making valid judgments. These essential qualities could pave the path for earning good money since he/she is gaining a great amount of exposure than normal stocks. Combined with high leverage, this could be the perfect formula for making high profit figures.

  6. Futures markets are fair and reliable

     Futures markets do not exhibit sudden hike or fluctuations in instrument prices in normal cases. So, getting to know the happenings around the world could significantly improve your chances of preventing losses and increasing your profits.

  7. Short selling is legal in Futures trading

     If there are chances of your purchased commodity’s prices to decline you can short sell your purchase. However, you cannot short sell all of your financial instruments and there are different market regulations in existence.Futures Trading offers plenty of benefits to the trader. The appropriate use of certain futures trading strategies could help in bridging the gap between existing complexities and untouched heights in futures trading. It would be wise to opt for a Futures Trading strategy which is both uncomplicated and upright.