Online Futures Trading
By: Anne Durrell
The futures market will spell out that an underlying commodity, currency or index will be sold or bought for a specified price on a specified date to be named in the future. Sometimes the word underlying is used to mean the actual commodity or security. That date is known as the expiration date.
Day traders, who buy and sell financial instruments inside the identical trading day, will use these online futures to make a profit without ever owning the commodity by keeping the profit sandwiched between what they bought it for, and what they sell it for.
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Long-term traders also deal with online futures trading. Those who have a specified interest in a given commodity can legally perform so-called "manipulation" of these contracts. As an example take a rice farmer. That farmer may sell a futures contract in order to guarantee that he will receive a definite price for his rice.
The point is that the trading party will be obliged to fulfill the agreed upon requirements within the conclusion of the contract term.
When reading online futures trading, you will see that the trading symbol for futures markets will consist of three things, the underlying or commodity, followed by the expiration date, and finally the exchange. As an example if you read EUR-200911-GLOBEX that would mean that you are looking at the Euro being exchanged to US Dollar currency future that will have an expiration date of November 2009.
The futures market has three different primary underlying instruments: commodities, which may be oil, silver or gold, stock indexes which may be the DAX, which is the German Deutscher Aktien IndeX, or the Dow Jones index for example, or finally currencies which deal with such things as the Euro into US Dollar exchange rate.
Part of the allure of dealing in online futures trading is that, unlike dealing with U.S. stocks, there are absolutely no restrictions for day traders. You should also be aware that the nominal amount that may be traded is one contract. The futures market is also extremely active in trading, thus ordinarily there is a very divergent daily price range, as well as a large trading volume.
Online futures trading brokers must be licensed and registered by the Commodity Futures Trading Commission (known as the CFTC), and many are members of the National Futures Association.
I suggest you check out my other guide on learn stock trading and online discount brokers
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