Watch this RJOF Quick Tips: Buying a Futures Contract video presented by our Senior Market Strategist, Phillip Streible to learn how a futures contract works and all the things to consider when purchasing one.
Why Do People Trade Futures Contracts
Leverage is the ability to control large dollar amounts of a commodity with a comparatively small amount of capital. Traders who purchase a futures contract are attempting to gain bullish exposure. On the other hand, traders who sell a futures contract are attempting to gain bearish exposure.
Things to Consider when Trading Futures Contracts
- Trade will realize an immediate profit with a move higher than the price bought.
- Trade will realize an immediate loss with a move lower than the price bought.
- Margin deposit is required for each contract bought or sold.
Things to Know Before Trading Futures Contracts
- Understand the leverage and specifications.
- Understand the margin requirement.
- Use stop loss orders.