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 marketThis day speculators traders actual commodities financial instruments unimportant futures contract wh actually traded rises falls value or time according value underlying commodity financial instrument.

If sounds complicated let’s try simplify ts aTiny bit looking example using agricultural commodity. Suppose farmer supplying wheat baker agrees sell 100 bushels wheat $6 bushel delivery bg set specified future date. price wheat remain constant specified date farmer simply deliver wheat tn paid $600. However, price wheat unlikely remain constant qe tochange daily basis futures contract particular transaction comes play valued everyday period bn date drawn date wheat finally delivered.

So, let’s assume day contract drawn price wheat falls $5 bushel. close business ty farmer’s account credited $100 ($6 – $5 100 bushels) baker’s account debited amount. Similar payments wd continue forth accounts price wheat rises falls everyday 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 originally intended pay $600. Similarly, farmer sell wheat market loss $100 but, se $100 contract he’s 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 buy contract fm buyer anticipates 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 isn’t simple er buy sell futures contracts. particularly true sectors market supply demand gy low 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 wh 7 hours day) te opportunities purchase sell world’s major currencies.

As enough, Forex transactions commission-free wh brokers earning money spread price buying selling currencies. spreads lowest you’ll financial market.

If you’re tempted look futures market investment Vehicleto fortune then, so, 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 smartest decisions made. 

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