Futures contracts are legally binding agreements between two parties to trade an underlying asset (such as oil, gold, indices, currencies, etc.) at a predetermined price on a specified future date. In other words, they are an agreement to buy or sell a specific quantity of an asset at a specified price in the future.
Why trade futures?
* Hedging: Companies and investors use futures contracts to hedge against price fluctuations. For example, if an airline expects fuel prices to rise, it can buy oil futures contracts to secure the purchase of fuel at a fixed price in the future.
* Speculation: Traders use futures contracts to make quick profits by predicting whether asset prices will rise or fall.
* Leverage: Futures allow traders to control a large amount of assets with a small amount of capital, magnifying profits and losses.
* Start small: Start trading small amounts of money until you gain experience.
* Risk Management: Determine the level of risk you can tolerate and use risk management tools.
* Be patient: Futures trading requires patience and discipline.
In conclusion, futures are a powerful financial instrument that can help you achieve your investment goals. However, they are also risky. Before you start trading futures, make sure you fully understand the risks and have a clear trading plan.