Met everything possible future negotiations can be very beneficial or total failures. It all depends on how smart your movements and decisions are. You can be on your way to success, once you have an idea of the operations involved in this trade.

These are some points to keep in mind:

-- Remember that the prices at which the product is sold forward is not determined by the commodity exchanges. Prices are based on demand and supply conditions. If the sellers are more than buyers, prices will decline, and vice versa. They are also determined by the buying and selling orders.

-- The futures markets are regarded as clearing houses for the current supply and demand information. Buyers and sellers of financial instruments, agricultural products, petroleum products and metals respond to those markets.

-- The primary objective of a futures market is to provide an effective method to manage price risks.

-- Hedgers and speculators are two groups of prospective traders.

-- Hedgers: They place their interest in commodities behind and try to avoid the risks included in the change in the price of commodities. You can be protected against the fluctuations that occur in market prices by hedging. Transférant a risk taker occupational hazard is involved. For example, if you are a manufacturer, you can protect yourself against fluctuations in raw material prices by hedging in the futures market. Coverage shall include the sale and purchase of coverage. You can buy and sell futures in the same quantity, as a protection against the risk of price change, while you still hold stocks.

-- Speculators: They predict market moves and buy commodities of no practical use to them. They buy these commodities "on paper" and still make profits out.

-- If you do not have the requisite experience or resources, it is better for you not to try to speculate or forecasting the market. Performance future results can not be based on the results of your past performance.

-- Futures contracts are traded on a term of the exchange. These are standardised contracts which may be useful for the purchase and sale of a certain product and at a predetermined price and date. The contract gives the right to buy and sell, unlike options contract, which does not.

Advances in technology and communication electronics and introduced new tools to better futures trading. However, you may end up losing thousands of dollars if you are not correctly perform the procedures involved.

By : Joseph Kenny