Futures Market’s Basic Structure

The Basic Structure of the Futures Market In this opening section, we will take a look at how the futures market works, how it differs from other markets and how the use of leverage impacts your investing. How Futures Work You are probably familiar with the concept of financial derivatives. A derivative is simply any financial instrument that “derives” its value from the price movement of another instrument. In other words, the price of the derivative is not a function of any inherent value, but rather of changes in the…

When Not to Trade

Knowing When Not to Trade is Important In my experience, one of the toughest challenges you may face as a trader grapple with is knowing when to keep your powder dry, a Wall Street maxim for staying out of the market – knowing when not to trade.  Essentially, keeping your powder dry means saving one’s resources, and being prepared for when they will be used in the most effective manner. In trading, this translates into only putting capital at risk when the opportunity offers the lowest risk and highest probability.…

How Futures Market Works

How does the Futures market works? The futures market is a centralized marketplace for buyers and sellers from around the world who meet and enter into futures contracts. Pricing can be based on an open cry system, or bids and offers can be matched electronically. The futures contract will state the price that will be paid and the date of delivery. But don’t worry, as we mentioned earlier, almost all futures contracts end without the actual physical delivery of the commodity. What Exactly Is a Futures Contract? Let’s say, for…