The concept of trading futures is a scenario where two parties agree to trade on the exact date in the future for a pre-determined amount. The reason why this is so peculiar is due to the chance that, in the future, the value of the sold asset will change in value. This is why both parties need to agree on a price that suits them in order to protect their investment from a future trend shift.
In other words, the party that is buying doesn’t want to face the scenario where the value of the asset grows and they have to end up paying more, while the party that’s selling doesn’t want to see the opposite scenario. On a volatile market, both of these are a possibility, which is what makes futures trading a great investment option. Here are several other reasons why considering this might be a great idea on your part.
1. Influence of technology
The first thing worth mentioning is the fact that the influence of the digital world on the world of commerce and the concept of the investment itself is quite staggering. First of all, it’s quite easy to find a suitable platform that can help guide you through the entire process without the need for traditional brokers. This makes the overall experience a lot cheaper. Other than this, the availability of information in real-time and the plethora of available learning materials are also quite influential on the popularity of this concept, as a whole. The introduction of the blockchain technology, in collaboration with the IoT, might make these things even more appealing to tech-savvy traders and investors.
2. Liquidity and volatility
The first two benefits of trading futures lie in the fact that you get a high level of liquidity, as well as a degree of volatility that can maximize your profit. This means that if you are certain about the direction that the good is going to make, you could, potentially, immediately sell the commodity after buying it. The difference in the value that you paid for the future and the price of that same good (at the moment) is a direct profit (or a direct loss). This option, alone, nonetheless, makes this a liquid asset.
3. Commissions are fairly low
One of the biggest profit concerns when it comes to investment income goes to the fact that broker commissions may be fairly substantial. When it comes to trading futures, this commission seldom goes over 0.5 percent of the full value of the contract. Provided that you use an online platform, you can wrap up all the broker-related services with less than $5. Seeing as how, for these same services, a traditional broker would charge as much as $50, this is a massive saving, especially for those who plan to regularly use this feature.
4. A vital part of the commodity market
The next thing worth understanding is the fact that it’s incredibly important when it comes to commodity trading. This means that it’s possible to trade futures in any kind of commodity market. Most commonly, we’re talking about commodity farming, energy raw materials, fuel and petrol, nonferrous metals, natural rubber, lumber and, of course, precious metals. The latter is particularly popular, due to the fact that they’re seen as the staple of diversifying one’s resources. While platinum and palladium have a wide industrial application, gold is still seen as the go-to precious metal. This is especially true when it comes to online futures trading platforms.
5. Low entry barrier
One more benefit of investing in futures trading is the fact that all of the modern platforms have a way of ensuring a seamless trading involvement even for those who have no previous experience in the field. Sure, in order to make a successful trade, you still need to learn a thing or two about the field that you intend to trade-in. The problem, nonetheless, lies in the fact that when it comes to the actual act of trading futures, all you have to do is find a suitable platform and register. From this point on, you’re guided in a step-by-step manner towards your first trade and, from there on, the rest of your trading experience.
In the end, it all comes down to your knowledge of the commodity market. For instance, if you’re buying and are sure about the growth of the trend value of a certain commodity, of course, you’re going to buy as much as you can. On the other hand, if you’re not 100 percent certain, you could take a calculated risk instead. Either way, trading futures is your chance to take larger control over what you’re dealing with.