The world of future trading is exciting but it also have some big risks and weirdo words. Future trading can involve some specialized terminology that may seem daunting to beginners. Here are some key words and phrases to help you navigate the world of future trading:
1. Futures Contract: A legal agreement to buy or sell an asset at a predetermined price and date in the future.
2. Underlying Asset: The specific asset (commodity, currency, stock index, etc.) that the futures contract is based on.
3. Long Position: Buying a futures contract with the expectation that the price of the underlying asset will rise.
4. Short Position: Selling a futures contract with the expectation that the price of the underlying asset will fall.
5. Margin: The initial deposit or collateral required to enter into a futures contract. It acts as a form of security for both parties.
6. Leverage: The use of borrowed funds or capital to control a larger position in the market. It amplifies potential profits but also increases risks.
7. Settlement: The process of fulfilling the obligations of a futures contract, either through physical delivery of the underlying asset (physical settlement) or through a cash payment based on the contract's value (cash settlement).
8. Expiration Date: The date on which a futures contract expires and must be settled.
9. Contract Size: The specified quantity of the underlying asset that is traded in a single futures contract.
10. Tick Size: The minimum price increment at which the price of the futures contract can fluctuate.
11. Market Order: An order to buy or sell a futures contract at the current market price.
12. Limit Order: An order to buy or sell a futures contract at a specific price or better.
13. Stop Order: An order to buy or sell a futures contract once the price reaches a certain level, triggering the execution of the order.
14. Volatility: The degree of price fluctuation in the market. High volatility can present both opportunities and risks for futures traders.
15. Hedging: Using futures contracts to offset potential losses or risks associated with another investment position.
These are some of the most basic terms every traders should know before trading. While Future trading reward you some percentage more the risk also rise in backyards. It's always better to do with small leverage at beginning.
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