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Best Article On fx trading, forex currency, futures trading, online currency, futures trading
Futures TradingBy Priya of Picmoney.com Futures trading refer to all transactions that involve contracts between parties to
purchase or sell merchandise of particular dates in the future. Futures are highly standardized
with particular specifications for underlying asset or instrument, type of settlement, amount-
units, as well as, currency and delivery. Basically when you are involved in futures trading, you
are agreeing to purchase a particular product which the seller has not been able to produce for a
set amount. People are attracted to futures trading because it enables them to hedge risks and
think about the future performance of a product.
Futures trading involve differing futures contracts in relation to the various assets being traded.
The individuals involve in futures trading are usually grouped into two- hedges and the spectators.
Hedgers are those that purchase or sell in the futures market to secure future price of commodity
intended to be sold at much later date. The speculators are those people who do not aim to minimize
risks but to gain advantage amidst the risky nature of the future markets. The main objective of
spectators is to gain profit from the various price changes. They do not want to own a commodity
but enter the market through finding ways to get high profit by offsetting rising and the
diminishing prices.
Aside from hedgers and speculators, regulatory bodies are also significant actors in futures
trading. The US futures market under the Commodity Futures Trading Commission (CFTC) and the
National Futures Association (NFA) regulates the futures market. It is also required that brokers
and firms be registered with the CFTC to issue or buy or sell futures contracts. The CFTC has the
power to investigate and punish through the Department of Justice those people who are proven to
have violated the NFA’s business ethics and code of conduct.
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The big banks in the market are known as market makers, as they are willing to buy or sell foreign currencies at the rates quoted by them up to any extent. Depending upon its resources, a bank may be a market maker in one or few major currencies. When a banker approaches the market maker, it would not reveal its intention to buy or sell the currency. This is done in order to get a fair price from the market maker.
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