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Written by Aaron Adam
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Futures trading is an investment practice that often comes under fire by critics who allege that the speculative trading of futures contracts causes price gouging and shortages and bubbles because it interferes with the normal cause and effect of supply and demand. While futures trading can contribute to some of these negative impacts, it is doubtful that they are the sole cause of these circumstances. In fact, futures trading can have some very positive contributions to the overall economy beyond the profit margins of speculative investors.Optimal conditionsAccording to the general consensus among economists, in a competitive market economy, the following conditions are optimal: many buyers and sellers trading openly, with no one group or individual controlling the market for one good; |
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Written by Aaron Adam
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Futures trading is unique in that investors can actually make a profit off of declining prices. To make a profit off of a dip in futures contract prices, futures traders adopt a short position. This is also called being "bearish" on a certain futures contract or commodity. |
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Written by Aaron Adam
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Futures traders must understand orders and how each type of order works to successfully trade futures contracts and avoid costly mistakes that can occur from not fully understanding what each type of order does. |
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Written by Aaron Adam
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Although they're traded in a similar fashion to stocks, the truth is that a futures contract is an entirely different animal. In fact there are a variety of key differences between futures and various other financial instruments such as stock and options. It's important for investors in the futures markets to know and understand these differences, so they'll have a better grasp of what they're buying and selling. |
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Written by Aaron Adam
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Futures contracts are becoming increasingly popular among investors because they can allow big profits to be made with minimal investment capital. A key factor in this potential for high reward for minimal capital is something called margin buying.
Margin buying is essentially the purchase of securities with money borrowed from a broker. You put up a certain amount of cash and the broker gives you more money. Other securities owned by the buyer are used as collateral. Margin buying has the effect of allowing investors to make big futures purchases with a small amount of money, |
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