While it can be argued that stock and forex trading are the more popular forms of online trading with high profit, it can also be argued that futures trading can be attractive with higher profitability. Many investors have shown that money can be made using this method in various arenas; however, great losses have also been experienced because of the primary feature that all investments are placed in the future. This, unfortunately, brings with it a great deal of risk, but money can be made quickly with high liquidity. Of course, these are not the only considerations to make when opting to trade in online futures investments; there are a plethora of points to take into account. This article will help you take stock of these considerations and using the pros and cons help you decide if futures trading is the best option.
1. High Levels Of Liquidity
Future trading contracts are traded in very high numbers each day; thus presenting with high levels of liquidity. The consistent presence of numerous buyers and sellers in the futures markets ensures that market orders are placed speedily and do not show large fluctuations in price; therefore, the positions will be cleared quickly and easily without any influence on the price.
2. High Payout For Speculations
Investors with good judgment can make easy and quick money in futures trading due to the fact that he is trading with approximately ten times more exposure than the average stock trading. As is mentioned, the prices move more quickly in this market and this decreases the risk of losing money on orders; however, it may be minimized by using stop-loss orders.
3. Low Commissions
One expense that can decrease profit immensely is that of broker commissions; however, the commissions on futures trading is quite low and are typically charged when the position is closed resulting in less expense. In fact, online trading commissions can be as low as $5 per side in comparison to the traditional $50 full-service broker rate.
1. Lack Of Control
Potentially the greatest drawback of online futures trading is the lack of control over the investment. Due to the fact that the order is placed in the future, there is no control over the behavior of the order and this can ‘go one way or another’. Unfortunately, this fact increases the risk of investment and increases the risk of loss.
2. Not Suitable For New Investors
While seemingly a simple form of trading, futures trading can be complex with many issues to consider and these issues make futures trading unsuitable for new investors. In addition to the lack of control, which can be daunting for new traders, it is important to have a strong understanding of all trading terms, theory, and practical skills – aspects which new traders will not have. If a new trader is interested in futures trading it is recommended they consult a professional and experienced trader to avoid losing substantial amounts of money.