Did you know that the size of the global futures market is predicted to grow in 2024, reaching millions of contracts traded daily across a variety of commodities, indices, and currencies?
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Backed by high liquidity and flexibility, the futures market has proven to be one of the most popular trading instruments for traders looking to hedge risk or capitalize on market uncertainty.
Here’s How to trade futures
Ever wondered what it takes to trade futures in 2024? This guide will walk you through the basics and explain what it all entails – the key steps, the benefits, and the risks involved in trading futures.
We hope you will feel comfortable exploring these opportunities and to trade futures. What’s more, Finbok is here to help you trade futures every step of the way.
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1. What Does It Mean to Trade Futures?
In futures trading, you’re buying or selling a contract to trade an asset at an agreed price on a future date; the asset you’re agreeing on can be a commodity such as oil or gold, or an index or currency.
When you trade futures, you’re not buying the asset, but a contract on that asset.
– Benefits: They’re standardised contracts that are traded on regulated exchanges, which means that they represent transparent and liquid markets. They enable speculation, where individuals bet on price movements without actually owning the underlying asset.
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– Risks: Futures are leveraged instruments, which means that gains and losses are both magnified, so while they offer high potential, the potential for large losses is just as great if the market moves against you.
2. Why Trade Futures in 2024?
With unpredictable markets proliferating, soaring interest rates and inflation, and traders wanting to protect themselves from potential losses as well as taking advantage of quick price movements, the global economic landscape in 2024 offers a wide range of futures trading opportunities
– Why trade futures? Futures contracts allow you to gain whether the market goes up or down. That’s a big advantage in volatile times.
– All-access markets: Futures are traded 24 hours a day, five days a week, giving traders access to a vast array of asset classes, from weather, metals, and oil to equities and currencies.
At any moment, anywhere, the markets are open, and traders can react to events as they unfold.
3. Step-by-Step Guide: How to Trade Futures
Here’s how to get started if you want to trade futures in 2024:
Step 1: Choose a Reliable Broker
The first crucial step is to choose a trustworthy broker, who gives you low fees, an easy-to-use platform, and access to all the global futures markets.
Finbok is an example of a platform that offers these features as well as educational tools for beginners.
Step 2: Understand Margin Requirements
The percentage of the contract’s value that brokers require you to put up initially before you can start trading. You should keep an eye on your margin level because if it falls too low you will be subject to a margin call, which will force you to liquidate your contract. This type of trading is leveraged: you can essentially trade a large position but commit much less capital and, if the market takes a big swing against you, you can lose a lot of money.
Step 3: Research the Asset You Want to Trade
Whether it’s trading oil, an index, or currency, trade only if you know what affects prices – for example, supply-demand fundamentals and geopolitics determine the price of oil futures – and do your homework before making a trade.
Step 4: Develop a Trading Strategy
That strategy will depend on your goals, time horizon, and risk tolerance. Popular strategies include ‘trend-following’,’swing trading’, and ‘hedging’. It’s usually best to start with a simple strategy and refine it over time as you get more experience.
Step 5: Monitor Market News and Set Risk Parameters
In the world of futures, prices can be moved by everything from international economic reports to rainfall in the corn belt. Keep up to date with news items, and set stop-loss and take-profit levels to help mitigate risk.
Step 6: Execute and Manage Your Trades
Wait until you’re set. Then you’re ready to execute the trade and watch the market. Futures trading requires vigilance because prices can move quickly. Make adjustments to your positions as needed to protect your capital.
4. Best Practices for Trading Futures
If you trade in futures markets, there’s no way around it: you need to adhere to best practices if you want to minimize risks and maximize your chances of success.
Diversify Across Asset Classes
Avoid the gambler’s fallacy of putting all your capital into one type of futures contract. Diversify across commodities, indices and currencies so that a poor performer is less likely to have a major influence on your portfolio.
Leverage Wisely
Leverage can magnify gains and losses, so make sure that you are using leverage in a prudent manner and within your risk tolerance. Over-leveraging is one of the most common causes of serious losses for traders in futures markets.
Stay Informed
What makes the futures market most volatile is that it follows what happens in the global economy. You can start to read market news routinely and try to understand the market trends to make better decisions, which might be helpful for your portfolio.
5. Balancing the Benefits and Risks of Futures Trading
First of all, futures trading has a lot of advantages. Mainly, it is a great chance to earn money because the essence of this business is to sell something with a guaranteed price at the same time when you buy it from another person.
As a consequence, you could earn some money from the difference between the buying and selling prices.
On the other hand, the risk of this business is quite high. Mainly because when you start selling something, the price could be very different and you have no idea what would be a price at the end of your deal.
– Advantages Futures contracts enable traders to insure against price movements, to speculate on the direction of markets, and to diversify their portfolio; they offer ample liquidity, which means they’re easy to enter and leave.
– Risk: The leverage in futures trading is what both increases your gains when you’re right and multiplies your losses when you’re wrong, so it’s easy to lose all your capital if the market moves against you. Futures prices are to unexpected economic data releases, geopolitical tensions or natural disasters.
Why Trade with Finbok?
Finbok enables traders to trade futures in a robust and efficient manner with the lowest fees and the best educational resources in the market. Finbok supports traders in trading commodities, indices, and currencies. Finbok supports traders in achieving their goals in the dynamic market.
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6. Top Markets to Trade Futures in 2024
There are several key markets to consider when trading futures in 2024:
– Commodities: oil, gold and agricultural products are some of the most actively traded futures contracts and are largely driven by supply-demand dynamics, and thus highly sensitive to geopolitical developments.
– Indices: Futures on a trading index like the S&P 500 or the Dow Jones allow you to bet on the performance of a group of stocks and avail of the convenience of one contract for a composite picture of the market.
– Currencies: If you want to trade a currency pair and take advantage of the exchange rate, forex futures are what you need.
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7. When Is the Best Time to Trade Futures?
Futures markets and trading screens are highly active 24/5, but not at all hours of the day are they equally liquid or volatile.
For instance, commodities such as oil tend to have the greatest volume and agitation during the hours of trading in the United States.
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Certain currency futures, on the other hand, are likely to be most active during the hours when European trading overlaps with US trading. The best times for trading might be most effective when you at least partly anticipate what is to come.
If you would like to hedge risk, speculate, and diversify your portfolio by trading futures in 2024, our guide and best practice tips will help you do so successfully.
As long as you follow our advice and tips, you will be able to navigate the futures market in a clever and confident manner, using the tools and resources available through platforms like Finbok.
