Forex Trading Daily Forecast EUR/USD

Soon will be activated
UP - 0%
 
DOWN - 100%
 

BASES OF FUTURES TRADING

futures

Most likely you have met the news about the futures market regarding rising oil prices and rising price of coffee. And you've probably wondered whether you can make money on price movement. You can also trade directly with your own account of on the futures markets.

It is an interesting and at the same time different market  because it offers trading contracts on almost everything from wheat and corn to the indexes and interest rates. You can earn both a price increase, and in their decline. Futures exchanges around the world constantly introduce new products and new commercial technologies to meet the investment interests of potentially great number of traders.

Nowadays the only thing to do is turn on your computer, log into your account and start trading.

Futures contracts 

Futures contracts is the main establishing component . To trade on this market and have success, it is necessary to know the nature of the contract and how it works. Let's start with basic definitions and then will move to individual contracts and opportunities to profit from them.

"Futures contracts is an agreement between seller and buyer, the seller undertakes to supply specific goods to the buyer on a specified date and specified price.

The definition seems simple and actually it really is. Buyers and sellers create futures contracts. In futures the number of contracts is virtually limitless. While the market has sellers and buyers contracts can be  created.

Futures and Contracts for Differences (CFD)

Futures are similar with CFD because the trade using  the two instruments depends on the exact number of sellers and buyers. Futures exchanges monitor the quantity of existing futures contracts and make statistics about it. It shows the number of existing contracts for each commodity,  for each trading period. For example, if you are looking for November crude oil futures and see that their volume is 90,000, this means that on that day  on the exchange were created 90,000 contract. They will be valid until the beginning of November. The volume provides sufficient information about the  trade on the exchange and how many people are involved in the trade, but does not give a complete picture and information about what is happening on the market. Part of this volume is  generated by traders who have made contracts on the market in the past and want to close this position. Let us imagine that we have four players (traders) in this scenario. Their names are Buyer A and Seller A and Buyer B and Seller B. Buyer A wants to buy 10 oil futures contracts. To fulfill this his wish, he needs a seller. At the same time, Seller A wants to sell 10 contracts. Buyer A and  Seller A gather and make 10 contract. Now imagine that Buyer A wants to sell his futures because he has gained a good profit. To sell them it is not necessarily to be back to Saller A who may not want to buy them back. To manage to sell the crude oil contracts Buyer A must take the position of a Saller.

So now he  appears as Seller B.  Seller B (or Buyer A) needs to find a buyer for his  contracts. At that time, Buyer B wants to buy 10 November futures contracts on crude oil. Then Buyer B and Seller B gather and make  10 contracts. With the performed  sale, Buyer A (or Seller B) is no longer on the market and is out of the trade. This allows the Seller A and Buyer B to come together in order  to make jobbing of 10 crude oil  contracts. Let's see how these transactions have affected the volume. Initially when the first transaction  was done Buyer A and Seller A make 10 new contracts which increases the volume with 10. In the second transaction Buyer B and Seller B create another 10 new contracts. Thus, the final volume increased to 20 (10 +10 = 20) contracts. As noted previously, the volume does not give a clear idea of the whole picture and it is not noticed that  there are 10 actual contracts on the market is  These contracts are called active or open contracts ("open interest").

Open contracts are those that are already created but not closed or expired. Futures traders have to know how many contracts are created and how many are actually active ones. High volume and more open contracts is a clear signal of good liquidity on this market. This leads to easier entry and exit from the transaction and vice versa.

Forex Trading Daily Forecast EUR/USD

Soon will be activated
UP - 0%
 
DOWN - 100%