What Is Futures Trading?
Futures trading involves contracts where two parties agree to buy or sell an asset at a predetermined price on a specific future date. Unlike spot trading, there's no immediate exchange of the asset; instead, the agreement is binding, with the trade settled when the contract expires.
Futures contracts cover a wide range of asset classes, such as commodities, indices and currencies, allowing traders to speculate on price movements or secure a fixed rate. This can be especially useful for businesses aiming to manage costs.
Additionally, futures markets often provide liquidity and standardized terms, which can make it easier to enter and exit positions. Futures trading also offers leveraged positions, enabling traders to control large amounts of an asset with a smaller upfront investment, amplifying both potential gains and losses.
