1. Futures Fundamentals: Introduction
  2. Futures Fundamentals: A Brief History
  3. Futures Fundamentals: How The Market Works
  4. Futures Fundamentals: The Players
  5. Futures Fundamentals: Characteristics
  6. Futures Fundamentals: Strategies
  7. Futures Fundamentals: How To Trade
  8. Futures Fundamentals: Conclusion


At the risk of repeating ourselves, it's important to note that futures trading is not for everyone. You can invest in the futures market in a number of different ways, but before taking the plunge, you must be sure of the amount of risk you're willing to take. As a futures trader, you should have a solid understanding of how the market and contracts function. You'll also need to determine how much time, attention, and research you can dedicate to the investment. Talk to your broker and ask questions before opening a futures account.

Unlike traditional equity traders, futures traders are advised to only use funds that have been earmarked as pure "risk capital"- the risks really are that high. Once you've made the initial decision to enter the market, the next question should be "How?" Here are three different approaches to consider:

Do It Yourself - As an investor, you can trade your own account without the aid or advice of a broker. This involves the most risk because you become responsible for managing funds, ordering trades, maintaining margins, acquiring research and coming up with your own analysis of how the market will move in relation to the commodity in which you've invested. It requires time and complete attention to the market.

Open a Managed Account - Another way to participate in the market is by opening a managed account, similar to an equity account. Your broker would have the power to trade on your behalf, following conditions agreed upon when the account was opened. This method could lessen your financial risk because a professional would be making informed decisions on your behalf. However, you would still be responsible for any losses incurred as well as for margin calls. And you'd probably have to pay an extra management fee.

Join a Commodity Pool - A third way to enter the market, and one that offers the smallest risk, is to join a commodity pool. Like a mutual fund, the commodity pool is a group of commodities which can be invested in. No one person has an individual account; funds are combined with others and traded as one. The profits and losses are directly proportionate to the amount of money invested. By entering a commodity pool, you also gain the opportunity to invest in diverse types of commodities. You are also not subject to margin calls. However, it is essential that the pool be managed by a skilled broker, because the risks of the futures market are still present in the commodity pool.


Futures Fundamentals: Conclusion
Related Articles
  1. Investing

    Commodities Trading: An Overview

    Even non-professional traders can participate in the commodities markets. Here's how:
  2. Investing

    Swimming Pools: Costs Vs. Long-Term Value

    Consider the costs of installing and maintaining a swimming pool, and compare this with the pool's utility and the market value it adds to your home.
  3. Investing

    How to Manage Risk in Your Personal Portfolio

    To best manage your portfolio, first determine your risk tolerance.
  4. Investing

    Pooled Funds Minimize Risk and Reward

    Pooled funds combine money from many individuals to invest in vehicles like a mutual fund or a pension fund.
  5. Financial Advisor

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  6. Investing

    Getting Started In Stocks

    We'll provide a step-by-step introduction on how to invest - and succeed - in this market.
  7. Financial Advisor

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
  8. Trading

    9 Tricks of the Successful Forex Trader

    These steps will make you a more disciplined, smarter and, ultimately, wealthier trader.
  9. Investing

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one. Read about how to choose your first broker here.
Frequently Asked Questions
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, I can save 6.5%. Should I do this?

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ...
  2. My wife and I both converted our Traditional IRAs to Roth IRAs over a decade ago and have invested the maximum allowed each year since. We're buying our first home soon. Do we both qualify for one-time, tax-free, $10,000 distributions?

    You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction ...
  3. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ...
  4. Who manages the assets in a Roth 401(k) account?

    Learn how to personally manage the assets in your Roth 401(k) plan and determine the best options available to help meet ...
Trading Center