What Is Online Futures Trading?
Futures trading involves commodities of many different types. Trades are executed on the floor of an exchange by people registered with the U.S. Commodity Futures Trading Commission (CFTC). Through an on-line broker, you can trade futures right from your own computer.
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The Facts
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Futures contracts are agreements to buy or sell a specific amount of a commodity, at a certain price, at a later time. Futures contracts require actual delivery of the commodity, or a cash settlement, to fulfill the contracted obligation.
Hedging
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The majority of futures traders are commercial or institutional users of the commodities they trade. These traders are referred to as "hedgers." Hedgers attempt to use futures contracts to try to reduce the risk of their commodity losing value because of price change.
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Speculating
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Speculators are futures traders who do not produce any specific goods. Speculators are simply looking to benefit from the price changes that occur with many different types of commodities.
Regulation
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Futures contracts must meet government requirements before being offered on an exchange. The CFTC oversees all requirements for futures contracts, and governs all trading activity.
Warning
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Futures trading can be very complicated. Consider the amount of capital you can risk, your personal trading experience, and your understanding of how commodity trading works, before committing any money to on-line futures trading.
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