Future Trading Online

Futures contracts are very different from stocks and bonds, both in how they are traded and in what they represent. A futures contract is an agreement between two parties to buy or sell a particular commodity or financial instrument at a set price on a future date. Thus, the term “futures contracts” refers to the time component and the contractual obligation. The contract itself contains the precise details of the transaction, such as the commodity or instrument itself, the amount of that commodity or instrument, etc. All contracts are standardized according to the same format so that they can be traded on an exchange.

There are many different exchanges that futures traders can turn to in order to trade these contracts, such as the Chicago Mercantile Exchange, the Intercontinental Exchange, and the New York Mercantile Exchange. All of these exchanges are physically located inside buildings that can be accessed electronically. Each exchange only allows registered traders to use their facilities, as well as brokerage firms who buy and sell on behalf of their clients.

What about trading futures online? The rise of the discount online brokerages thanks to the Internet has opened up a whole new financial world, enabling trading to be carried on almost completely decentralized from the major exchanges. Likewise, there are also discount and full-service brokerages online that deal in futures contracts, as opposed to stock and bond markets, although brokerages can offer service to all three markets, as well.

Online futures brokerages can offer the same advantages as stock and bond brokerages: convenient access, the ability to view trading data in real-time, etc. The key difference is that the strategies for trading futures online are very different, and thus there are some new considerations in addition to traditional ones such as price-per-trade. Looking for complaints as well as ethical violations is very important, since there is the potential to lose a lot of money in futures trading; in fact, the risk is said to be greater than the stock market.

A good place to begin is the National Futures Association, which is the self-regulatory trade association responsible for maintaining professional standards of integrity among all registered brokers and traders. Visitors can search for online brokers by name and discover whether they have had any complaints or regulatory action brought against them by either the NFA or the Commodity Futures Trading Commission. The commission is a government agency tasked with maintaining the integrity of the commodities and futures markets as well as protecting the downsides of these markets from the ordinary consumer.

Trading futures options is not for everyone, and even experienced stock and/or bond traders need to be aware of the differences before jumping in. By finding the right brokerage, trading futures online can be made much easier to take part in.