How to make your first futures trade

Stocks, currencies, bonds, indices… Today’s financial markets are rich with assets which one can successfully use for constructing a diversified investment portfolio. Anyway, no matter how many stocks you use, you will never construct a safe portfolio without the use of commodity futures.

Although trading in these assets requires more experience than trading in currencies or stocks, at some point any investor should consider this opportunity.

5 Reasons to Invest in Commodities:

1. Lower variation: Unlike stock prices or indices, prices on futures never sustain rapid growth or decline. That is why including them in a portfolio of other assets you will lower its variation and help you achieve a modest payoff even if prices of all other assets fall;

2. Commodities are highly leveraged: Traders who use services of UK Forex brokers take positions in futures with margins, some fractions of their contract values. These margins can bring you much higher returns in case you’ve forecasted the market movement correctly;

3. Reducing the risk of seasonal changes in demand and inflation risks: Prices rise when the supply of commodities fall or under inflation. Investors expecting seasonal changes in supply and demand, always hedge risks using futures. The same way as you can benefit from seasonal changes by buying and selling them;

4. Higher liquidity: Commodities are more liquid than stocks or bonds as you can easily trade them and use profits from trading operations anywhere you might want. Their prices are rarely dependent on state of a particular country or company, they are influenced by the overall level of demand and supply in the whole market;

5. No manipulations: Prices on commodities never change under the influence of specific risks of a single corporation or country. They change only under risks, affecting the whole market of these commodities.

What Should Futures Trader Never Forget?

Although trading with commodity futures is safer, it requires more trading experience than Forex trading. Knowing time series analysis is not enough as time is not the sole determinant of demand and supply fluctuations of a particular asset.

Risks are also higher, especially if you use higher leverages and credit resources for financing your trade. Anyway, any broker asks about your trading experience from the start and they never allow beginner traders to operations with derivatives.

Jon Sumner

Jon Sumner

Experienced director of digital media with a demonstrated history of working in the publishing industry. Strong media and communication professional skilled in media sales, digital strategy, web development,...

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