What is Natural Gas Futures Trading?
Natural gas futures trading is the act of buying or selling a predetermined amount of exchange traded natural gas contracts on a predetermined date for a predetermined price. Natural gas is one of the most widely used energy commodity as it is one of the building blocks of industry and everyday human life making it a lucrative opportunity for any futures trader.
What are the Benefits of Trading Natural Gas Futures?
Natural gas futures have several benefits making them a highly sought after futures contract for many traders. One of the core benefits its that natural gas is a highly and deeply liquid market making it easy for traders to get in and out of positions quickly and efficiently. Over 400,000 natural gas futures contracts are traded each day, making it the 3rd largest traded physical commodity on the market.
It’s popularity in everyday life is another major benefit to natural gas futures. Currently, natural gas is the 2nd most used energy source in the world, lagging only behind crude oil. This popularity and usefulness makes natural gas a major commodity to have in one’s trading portfolio. Due to its widespread use globally, natural gas futures are highly volatile offering traders ample opportunities to make money on large swings by either going long or shorting the commodity depending on their outlook. Global demand is a very heavy influence on the price of natural gas and is something traders need to pay attention to.
Risk management is also a great benefit to trading natural gas futures. Due to the natural seasonality of natural gas (tends to be in higher demand during winter months) this creates a lot of volatility and allows hedgers to use it to better manage and mitigate risk.
Another major benefit of trading natural gas futures is the leverage it provides as well as efficient use of capital. At the time of this writing, natural gas is trading at 3.805 making the total value of a futures contract roughly $38,000, but you are only responsible for putting down and small fraction, called initial leverage. You are controlling over $38,000 worth of value for a fraction of the price, this what we call leverage. This leverage also affords you the ability to maximize your profit potential by affording you the ability to add other assets to your portfolio.
How Do I Buy Natural Gas Futures?
You can purchase a natural gas futures contract through a commodity exchange like RJO Futures or on an exchange sanctioned trading platform such as RJO Futures Pro. Platforms like RJO Futures Pro allow you to look at real time data and charts to determine levels of support and resistance that will help you decide on where you want your entry level to be. When you are looking to buy natural gas futures it is important to look at Henry Hub natural gas prices and data. Once you determine the entry level you feel comfortable with you can purchase your contract for whichever month you decide. Remember, natural gas futures are traded for expiration 12-months of the year so you can choose any month. You cannot purchase a contract with the same month expiration past the 15th of the month in question.
Before you start to risk actual capital, we recommend practicing trading a live market. This way you can get a feel for how the market moves and better determine your exit and entry levels as well as nail down the strategy that works best for you. RJO Futures offers a free 2-week trial of our platform, RJO Futures Pro. This trial allows you to trade a 100k simulated account, by using real time data, charts, and quotes. This is a great tool for any beginner or a seasoned trader looking to test out some new ideas in a zero-risk setting.
How Can RJO Futures Help me Invest in Crude Oil Futures?
RJO Futures has a team of dedicated, experienced, and willing Senior Market Strategists that are happy to assist you in buying natural gas futures. Our brokers can help you understand the market and work alongside you to determine the best course of action for everyone’s needs and risk capital. Please feel free to contact us and one of our brokers will get back to you shortly!