“The future belongs to those who
prepare for it today.” - Malcolm X
We often encounter the word futures
in forums or articles related to
trading, and I often wonder what really is it. By definition, Futures
is a contract concluded for delivery of a certain commodity in future
at a fixed price. In order words, the traded commodity will be
delivered within a specific time limit in a fixed price. The buyer is
obliged to purchase the commodity on the predetermined future date
while the seller is also required to sell the commodity in the given
date.
Commodities such as Gas, Oil, Gasoline,
Corn, Currency, Steel, Cotton, and Wood are the most often traded
commodities used in everyday life. It is traded in futures stock
exchange like NYMEX (New York Mercantile Exchange ), CBOT ( Chicago
Board of Trade ), CME ( Chicago Mercantile Exchange ), IPE (
International Petroleum Exchange ), LIFFE ( London International
Financial Exchange ), LME ( London Metals Exchange ).
Forex and commodities are traded in a
very similar way. Both Fundamental and Technical analysis are
applied in speculating price movements and Indicators, both
macroeconomic and technical ones, are also present in this type of
trading.
But certain differences also arises and
unlike forex wherein the opened position may be carried out forever,
futures have an expiration date. The standardized manner of encoding
the commodities differ from the currency quotations. The first
symbols brands the name of the commodity traded, unlike the currency
quotation wherein two names of currency are present. It is then
followed up by the delivery date. For example, NGH0 is decoded as NG
(natural gas); H – March; and 0 – the year 2010.
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