Futures Trading for Beginners – Getting Started

They say a journey of a thousand miles begins with the first step. This is true of futures trading for beginners as well. Even if you have investment experience you might not know the difference between stock trading and futures. Don’t get worried because that is the reason for this discussion. What is going to happen is that we will look at futures trading for beginners and give you some of the basics to get you started. If you have never been exposed to futures trading, it’s OK; the journey may be a thousand miles but we will take the first step together.

What Are Futures?

Futures trading is different from investing in the stock market or bonds since you don’t actually own anything. In futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is different for beginners in futures trading; it is like a bet on the future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.

What Is The Potential of Futures Trading?

Trading futures has the potential to be an incredible profit maker. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. While his results are truly extraordinary, not everyone can expect the level of successful trading he achieved, there is good news for every investor; you can make money in futures trading. You may only be a beginner trading futures, but you are savvy enough to recognize the potential in futures trading.

What Are Futures Markets?

The beginner in futures trading needs to understand that futures are not trading on the stock market. Some of the locations are well known like the Chicago Board of Trade, the New York Mercantile, the New York Cotton Exchange and the Chicago Mercantile Exchange. Some of the better known futures markets are:

  • Agriculture – This is a broad, commonly traded futures which includes such things as wheat, soybean and corn futures.
  • Currency Trading – Currency trading, also known as FOREX (foreign exchange) trading, involves buying and selling currency from many different countries such as the US dollar, the British pound and the Japanese yen.
  • Interest Rate Futures – This market focuses on financial transactions, interest rates and bonds.
  • Energy Futures – This market centers its attention on gas and oil futures.
  • Foods – This sector includes items such as coffee, sugar and orange juice.
  • Metals – This is one of the more popular and better known sectors. The typical commodities in metals are gold and silver.

What Do You Need To Do To Get Started?

There are several things you need to do as a beginner in futures trading:

  1. Start Learning – There is no substitute for education. Read books about futures trading, talk with others that trade futures and search the Internet for information about futures trading. Once you start investing your own money, you will be glad to understand futures trading.
  2. Create a Commodities Trading Plan – This is crucial. You need to outline your goals and objectives as well as your strategies in an unemotional manner. This way, when greed and fear interferes with your decision making process, you will have already decided your course of action.
  3. Select a Broker – This is a personal, but important part of the process. You can implement your own trades but you need someone to actually place the orders. Some full-service brokers offer more services and most Internet brokers offer lower commissions. Even though you’re a beginner in futures trading, define what you want from your broker and find someone who meets your needs.
  4. Use Japanese Candlesticks – This powerful commodity trading and charting system will help not only the beginner in futures trading but is valuable to the “expert” as well. Candlesticks will help you to find the trends in the market that most others miss.


Futures trading for beginners is nothing more than learning, defining your processes and sticking to your trading plan. This journey is no longer a thousand miles for you; you’ve already taken the first step so keep moving toward you goal!

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Stock Chat – Thursday 07/27/2011

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