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  • Add Url > stock market

    Risks and Rewards of Futures Trading

    Three types of futures traders

    There are basically three types of people who trade in futures: hedgers, speculators, and floor traders. A hedge trader is an individual or company which trades in the futures market so they can establish a known price level to satisfy a future need to buy or sell the underlying commodity. They do this in an effort to protect themselves against the risk of an unfavorable price change when it comes time to fulfill their need.

    The second type of trader, the speculator, is more like a stock trader.

    These are individuals or companies which try to make a profit from the price fluctuations of the underlying commodity. Whenever someone speculates in a futures trade, there is always someone who is taking the opposite position, or betting against the speculator.

    The third type of futures trader is known as the floor trader. These are people who buy and sell for their own accounts directly on the trading floors of the exchanges. These are a very elite group of traders, not unlike Day Traders in the equities market. They are credited with giving the futures market the liquidity that it needs in order to function.

    Of the three types of traders found in the futures trading, most people who enter this market looking solely for a profit fall under the second category of the speculator. This is an extremely risky market to trade in, and one must be armed with the right kind of knowledge in order to be successful.
     
     


     




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