The perception that a lot of people have about commodity futures trading is that it involves too much risk for them to want to get involved. In fact, many people compare futures trading to gambling. The interesting part of this perception is that although there is some risk of loss, there is also a large element of reducing your risk. If you take the time to plan and research, this kind of trading can really be profitable for you.

Here are several reasons why you may want to consider trading on the futures market.

Traditional stocks require you to invest the full value of the contract at the beginning. This is not the case in futures. You are usually only required to deposit between 5 and 10 percent of the total value of the contract at the beginning. This provides you with the ability to get into larger markets than you could if you had to front the entire fee. Since you only have to put down 5 – 10 percent in the beginning, it means if the markets are moving in your direction, you have the potential to make a great deal of money. However, you do have to be prepared for a big loss, so you have to make sure you do your homework.

Since you are trading on the future of something, everything is done on paper. This means you do not have to worry about when and how to make the transaction. You also do not have to worry about where and how to store the actual commodity because it does not belong to you yet. When you trade futures, the market is considered to be very liquid. This is because of the large volume of contracts that are traded each day on the market. If you want to buy or sell in the market, you can usually do this very quickly.

One of the other really big benefits of trading on the futures market is the time that it can take you before you can turn a profit. The traditional stock market can take several years before you see any real return on the money that you invested in it. When you trade in the futures market, if you get a hit on your first trade, you can make an immediate and substantial profit in just your first few months.

Keep in mind that any kind of investing is a gamble. Whether you are investing your money in the stock market, the futures market or even your friend’s new business there is always the potential that you can lose all of your money. Before you invest you money in anything, you should spend some time getting educated. Yes, it is now easy to make trades online, but you are running a risk if you do not do some serious homework first. Another rule of thumb you should keep in mind when you are investing is to never invest any money that you cannot afford to lose. It can be tough to stick to that, but you will be better off.

Author Bio: Ellie Lewis recently researched futures trading for an article on the stock market. She learned that commodity futures trading can be a lucrative profession.

Category: Finances
Keywords: futures trading,commodity futures trading