Basically, a futures trading
exists between two traders and is actually considered to be really risky. Like any other type of trading, a futures
trading is a contract that one should properly understand and thoroughly plan
in order to make a returns. The
investors, as well, needs to know all the risks entailed in their
investments. Unlike in options trading
which is also a high-risk contract, the future prices of the assets in a
futures trading, change. Since this is
between two traders, one trader will sell the asset while the other buys for a
predetermined price on a predetermined date.
In futures trading, one trader has to buy the contract while in options
trading, the buying trader can make his choices whether to buy it or not. This is the reason why trading in futures
market is more risky than any other types of trading.
Moreover, one trader in futures
market has to face higher risk because both traders are required to sell and
buy the assets at a future price on the agreement date. This type of trading is chancy and uncertain;
however, there are still many traders and investors who opt to deal with
futures trading because of the fact that both the seller and the buyer know
that the assets would be sold and purchased in the future. Usually in futures trading, the buyer is not
obliged to settle any future expenses or there is no premium that has to be
paid. Unlike the traditional way of
trading where anyone can trade, in futures trading, the investment is made only
according to the chance of making returns or revenues considering the possible
trends in a predetermined date.
Generally, it is recommended to everyone who is involved with futures
trading to avoid trading excessively.
