What Is Future Trading And How to Future Trading 2020|
Do you know what is future trading? If no, then today I will tell you about what is Future trading? Actually, Future trading is one of the most interesting forms of trading in the stock market. The best part of it is that it can be implemented in many trading segments.
However, there is no clarity on the time and year when futures trading began. Although in a regulated market environment, Future Trading first began in 1710 in Osaka, Japan.
A future trade is a legal agreement between seller and buyer in which you promise to buy or sell any shares before the date.
If it is said in easy words, Future trading involves a legal agreement to buy a derivative at a predetermined time and at a predetermined price. In future trading, buyers and sellers have an obligation to complete their contracts at a pre-determined price and time.
In trading, business is done in lots. I already told you that Lot is a bundle of some shares. Like SBI has 100 shares in a lot. Whenever you buy a lot of SBI, you will have to buy 100 shares simultaneously. If you want to do future trading, then you will need at least 100 dollars in starting.
Demerits of Future Trading :
By now you will know that there are many benefits in future trading. But today I will tell you some demerits of future trading so that you can find out that it is good or not for you. Before going into this business, we know some of the risks associated with future trading.
- If the market goes against your expectations, then you will lose your maximum capital in it.
If you buy a lot of any company, then you need a lot of capital at once time.
- If you have signed an agreement to buy shares of a company, then you have to buy that stock at that fix time whether you have money or not.
Merits of Future Trading :
Now I will tell you some benefits of its so that you can know what you will gain by trading in it.
- Using a margin trading account, positions can be taken in the future market by paying only a fraction of the total contract value.
- If the market is growing according to your estimation, then its return is very high, but if the market is not going in the right direction then you can also suffer loss.
- Brokerage and fees on future contracts are very low. Therefore a huge amount does not have to be paid in the investor’s commission.
- Short selling: There are many restrictions on short selling of shares, but short-selling of a future contract is legal and the investor is able to sell the future contract to get less exposure to the stock.
Investors need to be very cautious when investing in the future market, as they are equally risky due to high profit and high contract value.
How to future trading:
Future trading is the online buying and selling of commodity derivatives. Likewise, based on future performance, an electronic transaction of a commodity to a particular date for a future date (for the future) is future trading.
Suppose a person named ‘Ram’ makes a contract with ‘Mohan’ in May that he will give 100 quintals of wheat to ‘Mohan’ in the month of November at the rate of Rs 500 per quintal. ‘Mohan’ in return confesses that he will pay 50 thousand rupees in November instead.
If you analyze this deal closely, you find that many of its things are unique in themselves. The first thing is that the deal is being done for November in May, that is, the price of wheat for November is being fixed in May itself.
Secondly, it may be that ‘Ram’ does not have wheat and ‘Mohan’ does not have money while signing the deal. This is where commodity derivatives are concerned.
The product whose sale is being signed for November is derivative. To say derivative means that the product for which the deal is being made is a derivative form rather than the original product (underling) or in the case of wheat, which is being traded on the basis.
This unique process of trading is known as Future Trading. All this business is done through electronic commodity exchanges.
I hope that what is future trading, and how to futuree trading, you must have understood well. If you still do not understand what is future trading then you comment me.