Here is a clear, structured explanation for you:

What is trading on futures?

Futures trading is the buying and selling of futures contracts, which are agreements to buy or sell an asset (stocks, commodities, crypto, etc.) at a predetermined price on a future date.

You do not own the asset immediately; you are speculating on its price movement.

Key Concepts

🔹 Leverage

Futures allow you to control a large position with a small amount of capital, magnifying both profits and losses.

🔹 Margin

You need to deposit a percentage (initial margin) to open a futures position.

🔹 Long vs. Short

Long: You believe the price will increase.

Short: You believe the price will decrease.

🔹 Expiry

Futures have expiry dates, at which point the contract is settled.

🔹 Settlement

Can be:

Cash settled (difference paid/received based on price).

Physically settled (actual asset delivered, common in commodities).

Example

If you believe gold prices will rise:

Gold futures are trading at $2000/oz for December delivery.

You buy 1 futures contract at $2000.

If the price at expiry is $2100, you profit $100 per ounce (minus fees).

If the price drops to $1900, you lose $100 per ounce.

Benefits of trading futures

✅ Allows hedging (protecting your portfolio against price changes).

✅ High liquidity in major futures markets.

✅ Enables speculation with leverage.

✅ Works in both bull and bear markets.

Risks

⚠️ High risk due to leverage: losses can exceed your initial margin.

⚠️ Volatility can lead to rapid liquidations.

⚠️ Expiry and roll-over management needed for long-term exposure.

Steps to trade futures

1️⃣ Choose a regulated broker offering futures trading.

2️⃣ Understand the contract specifications (size, tick value, expiry).

3️⃣ Fund your margin account.

4️⃣ Develop a risk management strategy (stop-loss, position sizing).

5️⃣ Monitor positions and manage expiry.

6️⃣ Close or roll over positions before expiry to avoid unwanted delivery.

Should you trade futures?

Consider trading futures only if you: ✅ Understand market behavior and risk management.

✅ Are prepared for high volatility and margin calls.

✅ Have a clear trading strategy (trend following, spread trading, hedging, etc.).

If you are a beginner, it’s best to:

Start with simulated trading first.

Understand position sizing and how leverage affects your capital.

Avoid using high leverage until you are consistent.

If you would like, I can also prepare: ✅ A beginner futures trading plan template.

✅ Calculation examples on margin and P&L.

✅ Best markets for futures trading based on your interests.

Let me know if you would like these to support your learning efficiently.