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- Farmers, companies, and traders use them to avoid all sort of risks like bad weather or price changes.
- Speculators also use them to profit from any kind of price swings.
How Futures Work (Step-by-Step)
1. Agree on a Price: In futures, price is locked today for a future trade.
2. Set a Date: a decision is made when the trade will happen. It could be 3 months later or even more.
3. Profit or Lose: It's a two edged sword because when prices rise, buyers profit and if prices fall, sellers profit. In real-life, imagine reserving gold today for $500, even if it might cost $700 at launch. That means, you’re using a "future contract".
Types of Futures
1). Commodities: Examples of commodities are Oil, gold, wheat, etc.
2). Indices: Examples are S&P 500, NASDAQ, etc.
3). Currencies: examples of currency pairs are USD/EUR, GBP/JPY, etc.
4). Cryptos: These are Bitcoin, Ethereum, etc.
How to Trade Futures in 2025 (For Beginners)
Step 1: Learn how to trade futures. Like knowing what contract size is and all other things:
Contract Size means, how much you’re trading. For instance, you can make a contract of 1 oil = 1,000 barrels).
- Margin is a deposit to open a trade. It’s like a security fee.
- Expiry Date: This is when the contract ends.
Step 2: Pick a Trading Platform
You can use apps like TD Ameritrade, Interactive Brokers, or Binance Futures(for crypto).
Step 3: Start Small
- Start small by trading mini-contracts to limit risk. For instance, micro Bitcoin Futures let you trade 1/10th of a Bitcoin.
Step 4: Practice First
-Use a demo account or fake money to test strategies before investing big.
3 Big Mistakes to Avoid
1. Ignoring Leverage Risks: Futures let you control big amounts with little money but losses can exceed your deposit of care is not taken.
2. Forgetting Expiry Dates: Contracts expire. So you are expected to close or roll them over before they do.
3. Trading Without a Plan: Don’t ever guess when trading. You can use tools like stop-loss orders to minimise losses.
2025 Futures Trends to Watch
1. AI-Powered Trading: Use apps like Trade Ideas. It lets you use AI to predict price movement
2. Green Energy Futures: A typical example is lithium for electric cars and carbon credits. They are really booming.
3. Crypto Futures: The Bitcoin and Ethereum contracts are now the mainstream. You don't want to miss out.
Why Trade Futures in 2025?
- Hedge Risks: It's a protection against price changes.
- 24/7 Markets: You can trade crypto or global indices at anytime, which is an added advantage.
- Profit in Any Market: Prices go up and down and the good thing is, futures let you bet on both.
4 Tips for New Traders
1. Learn Free: There are available resources that lets you learn for free. Use this forum or watch YouTube channels like *lRayner Teo or The Trading Channel to gain the neccessary knowledge.
2. Follow the News: It's very crucial to follow the prices because they react to weather, politics, and tech breakthroughs.
3. Start with Commodities: Gold and oil are easier to understand than currencies. So, it's advisable to start with them
4. Use Stop-Loss: The lets you exit trades automatically to avoid losses and to also protect your money.