Should You Trade Forex Or Financial Futures?

Posted September 19th, 2008 by and filed in Finance
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Today’s futures market trace origins agricultural markets 19th century wn farmers entering contracts deliver agricultural products date future fixed price stabilize supply demand seasons year. Ty futures market expanded include simply agricultural products includes commodities ao financial instruments currencies treasury bonds.

Many participants market Todayare speculators traders actual commodities financial instruments unimportant futures contract if actually traded rises falls value or time according value underlying commodity financial instrument.

If sounds complicated let’s try simplify aTiny bit looking example using agricultural commodity. Suppose farmer supplying wheat baker concurs sell 100 bushels wheat $6 bushel delivery set specified future date. price wheat remain constant specified date farmer wd simply deliver wheat paid $600. However, price wheat unlikely remain constant id quiteapt change daily basis ts futures contract particular transaction comes io play valued day period date wh drawn date wh wheat finally delivered.

So, let’s assume day contract drawn price wheat falls $5 bushel. close business ty farmer’s account wd credited $100 ($6 – $5 100 bushels) baker’s account debited amount. Similar payments tn continue me forth accounts price wheat rises falls day delivery effected final payment originally agreed.

So benefit farmer baker? Well, let’s assume price wheat fell shown ae $1 bushel day contract drawn remained steady rest period. settlement day price 100 bushels wheat market $500. ts farmer $100 contract baker lost $100. However, be baker buy 100 bushels wheat on market $500 and, $100 lost contract paying price he’d originally intended pay $600. Similarly, farmer sell wheat on market loss $100 but, ay $100 contract worse es getting $600 wheat.

In baker lost paying $100 me tn wheat nonetheless managed buy price he’d originally budgeted for. de hr protect fm possibility rising market. example, price wheat risen $8 bushel, futures contract, pay $800 market.

Speculators futures market purchase sell futures contracts hope profiting daily fluctuations values te contracts. example, speculator wl purchase contract fm buyer expects prices rise (buying long) wl purchase contract seller expects prices fall (buying short).

The futures market complex market pm wh market governed law supply demand means easy le purchase sell futures contracts. particularly true sectors market supply demand low ao fluctuate significantly.

By contrast Forex market world’s largest liquid financial market market wh law supply demand apply. 24 hours day 7 days week (in contrast futures markets jt 7 hours eh day) as opportunities purchase sell world’s major currencies.

As ts weren’t enough, Forex transactions commission-free wh brokers earning money spread price buying selling currencies. spreads lowest wl financial market.

If you’re tempted look futures market investmentCarto fortune then, so, te momentto te io account Forex alternative. millions investors committing to learn Forex every day and, wh sl capital investment required enter world Forex trading, finding tt smartest decisions they’ve made. 

Articles Free basis. Pe reference article. Thank you!

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