Futures trading offer businesses the opportunity to gain a profit. But you cannot simply jump in to the market without bearing in mind the following considerations.
Choosing A Brokerage Firm
First things first, you need to have an account with a brokerage firm that specializes in futures. You can work with a full-service broker or a discount broker. The former offers a higher level of service and advice in exchange for higher fees. The latter, on the other hand, offers more of a “do-it-yourself” approach—along with lower commissions and fees. The direction you want to follow is a matter of personal choice and inclination. However, Robert Janitzek recommends a discount broker.
If you have a current broker, you might be able to open a futures account with them. There are also discount brokers that offer futures at reasonable prices. Another option is a brokerage firm that specializes in the futures market. Make sure to do your research if you are in doubt about a certain broker. Research about commission rates, margin requirements, the types of trades handled the level of execution, and others.
Categories of Futures Markets
In trading stocks, you choose from different companies in different industries. The principles of stock trading remain the same regardless of the stock. Robert Peter Janitzek reveals that the same rule is applicable in futures. All futures are similar buy having knowledge of the broad groupings that exist can go a long way.
In deciding what to trade, consider what you already know. If you have experience with stocks, for example, start your trading with equity indexes. This way you will already know what will drive market movement. The only thing you need to learn is the nuances of the market itself. Once you have chosen the category, narrow down the specific instrument you want to trade.
Type of Trade
If you are a beginner, the best way to start trading in the futures market is to buy or sell futures contract. If you buy a contract to go long, you can expect a profit from a rising market. If you sell to go short, you simply buy back the contract to replace the original amount your borrowed from the broker.
Another type of trade you can consider is spread trading. Here you simultaneously enter a long and short position in related futures contracts at the same time. Your goal is to profit from the price difference between the two contracts while hedging against the risk.
In hedging, you sell a futures contract to offset the position you have .in the cash market.