Every now and then, something will spark the public’s interest in the complex world of trading. A recent example of this is the movie The Wolf of Wall Street, which went over the top in highlighting the glamour of being a big trader.
On the other hand, trading movies often include as few details about trading as possible. They stick to the exciting parts, as any good storyteller probably ought to. While these stories highlight the lifestyle of a trader, the details of how trading works are excluded. This leaves many people with a vague concept of what trading actually is.
That’s where this article comes in. We will give you a more of a complete look. Instead of a focus on the fancy car a trader might drive, let’s take a look under the hood of trading itself with Futures Contracts.
Often people who don’t know trading will boil it down to a very simple explanation. Probably the most common version of this is summing up trading as buying stocks low and selling them high. In reality people trade many things, not just stocks.
When it comes to Futures, you are trading contracts to buy or sell things later, usually in 1 to 3 months. These contracts could be for food, energies, metals, bundled stocks (called an Index), currencies, and even more. Don’t be confused though, if you trade Futures Contracts for gold, no one will drop a shipment at your door. They are a type of asset called derivatives, because their value is derived from an underlying asset. Futures aren’t owning a piece of something, instead they are a trade with another trader based on prices.
So, Why Would I Care About Futures?
When we said Futures Contracts aren’t settled for the actual asset, what we mean is they are settled in dollars. In other words, it is all about money, and there is quite a lot of it. Futures are traded on large exchanges, for billions of dollars. There is always a trade available, and the most popular assets are traded in huge quantities. For those who learn to trade the market well, there can be huge rewards.
How Does it Work?
First you open a trading account with a Broker, to place your trades of futures contracts. Put enough into your trading account so you will cover the margins on each contract. This is like a safety deposit for the trade. You use the balance in the trading account to get contracts for assets, and become an expert in it.
Let’s say you decided to trade barrels of crude oil. You would buy or sell contracts for 1000 barrels. This means every penny of price change for a barrel of crude will mean 1000 pennies, which is $10. If you bought a contract, every penny the price rises is $10 more value of the contract and every penny it falls is $10 less. If you instead sold a contract this would be flipped, and a penny drop in the price would profit you $10. Of course your profits and losses are only locked in at the end of the trade or the day’s end, so timing is important!
Is It Really That Simple?
How trading futures contracts works is pretty simple, as we explained. On the other hand, succeeding at it is something that can take a lot of dedication and insight. At Earn2Trade.com, we offer education to help you learn all the details of how the futures market operates and (more importantly) how to succeed in it. The education comes on its own or bundled with The Gauntlet™.
The Gauntlet™ is a challenge to traders, offered by Earn2Trade. It lets you trade over the course of 60 days with simulated dollars on the real time markets, to prove you can succeed. If you profit, you will get an offer to trade for real money, based on your performance. This is a path any trader can take to get the money their skills are worth. Upon passing, you will receive a certificate and a funded trading account, where you keep 80% of the profits. Come join one of the biggest markets in the world, by proving yourself in futures with Earn2trade, at https://www.earn2trade.com/gauntlet.