Hello, I am CYPER, and today in this video I am going to explain why you should invest in futures trading or what are the advantages of futures trading.
But, before this, it is important to understand what is a futures contract?
A futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other.
Now, we understand what a futures contract is. Let’s discuss some of the unique benefits of futures trading.
Advantages of Futures Trading
- Futures Are Highly Leveraged Investments
- Future Markets Are Very Liquid
- Speculators Can Make Money Faster
Futures Are Highly Leveraged Investments
To trade futures, an investor has to put in a margin — a fraction of the total amount (typically 3% to 10% of the contract value). The margin is essentially collateral that the investor has to keep with their broker or exchange in case the market moves opposite to the position they have taken.
For instance, if you want to buy a monthly BTC/C2USD futures contract lot of 100 BTC on PCEX Member, you can own it by utilizing the 5% leverage offered by the exchange.
Future Markets Are Very Liquid
Future contracts are traded in huge numbers every day and hence futures are very liquid. The constant presence of buyers and sellers in the future markets ensures market orders can be placed quickly. Also, this entails that the prices do not fluctuate drastically, especially for contracts that are near maturity.
Speculators Can Make Faster Money
An investor with good judgment can make quick money in the futures market because essentially they are trading with 10 times more exposure than normal assets. With good market knowledge and trading strategies, one can make huge money even when a little price fluctuation occurs in the market.
These are some of the major benefits that you can enjoy while trading futures.