You can lower this risk, however, by managing your leverage properly with respect to your net worth, trading experience, and personal attitude towards risk. The successful trader is one who understands this and has the discipline to control leverage. Diversification
Futures contracts are also appealing because they can provide diversification to a portfolio of traditional financial assets such as stocks and bonds. Many investors are already aware of the benefits of diversification within their equity portfolios - the more company stocks you hold, the less volatile is the value of your overall portfolio since as some stocks go down, others go up. On average, the portfolio earns a return very similar to the entire market. In the same way, an investment in futures can provide diversification benefits in terms of reducing the overall risk of your investment portfolio and increasing total profits.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Futures and options are available on a wide range of instruments including agricultural commodities like wheat and soybeans, precious metals like gold and silver, foreign currencies like the Deutschemark and Canadian dollar, interest rates like U.S. long-term bonds and Treasury bills, soft commodities like coffee and sugar, index products on equities and currencies, and energy products like crude oil and natural gas, to name a few. With all of these markets, you are bound to discover a trading opportunity or two at almost any time.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Investors require market liquidity. A market is said to be liquid if transactions can be executed quickly and easily. There are many futures markets that are liquid, sometimes even more liquid than the cash market for the underlying instruments themselves. For instance, the futures market in U.S. Treasury bonds is regarded as being much more liquid than the cash market. In some cases, the futures market is so liquid that futures prices become the industry benchmark. For example, gold, crude oil and cotton futures prices form the basis for pricing other related products in the industry. On the other hand, some futures markets are thin, meaning not very liquid. As a trader, you must know the liquidity of the market that you are trading or want to trade, and adjust your trading style appropriately. Volume and open interest provide a good indication of market liquidity, the higher are they, the more liquid is the market. commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Futures and options prices are readily available from a wide range of sources including the Internet. This makes it very easy for traders to monitor the markets, determine their entry and exit points, and manage their futures positions - all of which provide more reasons to trade futures