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Why People Trade In Stock Market Futures

Author : Juelialos Kodahooa

Stock market futures trading is a specific kind of investment that is fairly easy to understand. Prices for futures trading are dependent strictly on supply and need conditions and are not set by commodity exchanges. When the need is high for the futures then the cost goes up and if the need is low then the cost goes down.

The number of orders that are available about the market floor that day is really the driving factor behind the cost for futures. While there's some risk connected with futures you also can make a huge profit and are protected against some kinds of risk. Any danger that is due to market fluctuations is eliminated when trading in futures.

Basically when you make a futures purchase you're purchasing a contract that's dependent on a future date in which a future change will occur. The main issue with futures is that the alter you're waiting for may not be the one you expect as you're the long term is not set and many points can cause changes.

Investing dependent on an assumption can be very profitable if you know how to read the market and realize the different trends.

You are able to also use hedging which can protect against market fluctuations as this allows for danger. An example of this is a manufacturer that hedges incase the cost with the raw materials increases and he can do this via the futures market.

You are able to have both a hedge sale and a hedge purchase. Futures may seem a bit confusing at first but with a bit of time and education you will be on your way to understanding futures thoroughly.

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Tags:   stocks, stock trading, finance, investing money

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Submitted : 2011-04-05    Word Count : 870    Times Viewed: 448