PMEX
PSX

Understanding Futures Trading

Futures trading is a financial contract where you agree to buy or sell an asset at a specific price on a future date.
You’re not buying the actual asset (like gold or oil), but a contract that tracks its price.

Futures Contract Explained

A Futures Contract is:

  • Standardized
  • Traded on exchanges (PMEX)
  • Has an expiry date and set quantity

Example:

  • Gold Futures: 1 contract = 100 ounces of gold
  • If Gold = $2,000 → contract value = $200,000

You don’t need full capital — just a margin deposit (~5–10%)

What Can You Trade in Futures?

Category Examples Symbols
🛢 Commodities Gold, Oil, Natural Gas, Corn GC, CL, NG, ZC
📈 Stock Indices S&P 500, NASDAQ, Dow Jones ES, NQ, YM
💵 Currencies EUR/USD, GBP/USD, JPY/USD 6E, 6B, 6J
🏦 Interest Rates Bonds, Treasuries ZN, ZB
🌾 Agricultural Soybeans, Wheat, Cotton ZS, ZW, CT

Why Trade Futures?

  • Leverage: Small margin, big exposure
  • Liquidity: Very active markets
  • Hedging: Lock in prices if you're a producer or consumer
  • Speculation: Profit from price movements
  • 23-Hour Market: Great for global traders

Most volume happens around U.S. and EU market overlap

Key Terms in Futures Trading

Term Meaning
Long Position You buy the contract (expect price to rise)
Short Position You sell the contract (expect price to fall)
Margin The deposit you put up to control the trade
Leverage Trading larger than your margin allows
Expiration Date When the contract ends
Roll Over Move from the current month contract to the next

Risks in Futures Trading

  • High Leverage = High Risk: Small moves can lead to big losses
  • Price can move fast: Especially during news events
  • Margin calls If your trade goes against you
  • Contract expiration risk You must close or roll over

Key Terms in Futures Trading

Feature Futures Forex Stocks
Leverage High Very High Moderate
24-Hour Trading Yes Yes No
Regulated Exchange Yes No (OTC) Yes
Expiration Date Yes No No

Beginner Tips for Futures Trading

Start with a demo account

Practice without risking real money

Know your margin & leverage

Understand how much you're risking

Understand the contract specs

Know what you're trading

Follow economic calendars

Be aware of market-moving events

Always use stop-losses

Protect your capital

Watch out for expiry dates

Know when your contracts expire

Focus on liquid contracts

E.g. ES, CL, GC for easier entry/exit

Summary

What? Futures Trading
Asset Contract, not actual asset
Used For Hedging, speculation, arbitrage
Markets Commodities, indices, currencies
Risk High (due to leverage)
Tools Needed Broker, platform, newsfeed, strategy