What is Futures Trading?
Futures trading involves buying and selling standardized contracts that obligate the buyer to purchase, or the seller to sell, a specific asset at a predetermined price on a future date. These contracts are traded on regulated exchanges and are commonly used for commodities like oil, gold, and wheat, as well as financial instruments like stock indexes, interest rates, and currencies.
Futures are used by two main types of market participants:
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Speculators, who seek to profit from market movements
- Hedgers, who aim to protect themselves against price fluctuations
Unlike traditional investing, futures trading allows for leverage, meaning you can control a large contract with a relatively small amount of capital. However, this also increases risk, making it important to understand the market, strategies, and potential outcomes before diving in.
Common indicies where futures contracts are traded on, are the S&P 500 (ES Minis), NASDAQ 100 (NQ Minis), and the Dow Jones (YM Minis). However, commodities are also widely traded. The listed commodities that are tradeable are:
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Energy Commodities - Crude Oil, Natural Gas
- Precious Metals - Gold, Silver
- Agricultural Commodities - Wheat, Corn, Soybeans, Cotton, Coffee
- Base Metal - Copper