Three Factors that Affect Futures Trading

When prices fluctuate, it affects every area of the economy.  When this happens people want to shield investments from negative fallout.  This can make futures trading a tempting option for some investors. Futures can reduce volatility for both businesses and individuals alike.  Trading in futures contracts can help safeguard your money and protect gains.

Futures trading should be approached the same as any other investment.  Many investors fail to heed this warning.  It’s important to have a firm grasp over what these are and what affects them.

Here are three items to help you get started.

1: General Factors 

Like any sort of investment, the economy itself will affect the value of assets. For example, prices often increase during boom times.  When things are not going so well, prices may go down.  Spotting these patterns is important.  Knowing when to apply them is even more key.

The wider factors that impact these must also be taken into account.  Factors that can come into play include politics, social instability, and commercial or industrial prospects.  Having an idea of where these are headed is key when when choosing your futures investments.

#2: Commodity Factors

 One of the largest and most popular segments of the futures markets is commodities.  This means that any factors affecting this area will need to be considered. Events which influence the supply or cost of production of a particular commodity can impact its value on the futures markets.

Think of agricultural futures, for example.  You can look at recent weather patterns, such as droughts or floods, in a particular area.  If you use this information to predict what might happen next, you could have a great opportunity.

Other items that may be considered are import and export policies.  Also, look at major changes coming.  Brexit is a good example here.

#3: Currency Factors

 Currency futures are as volatile as the markets they’re based on.  They are Influenced by a large number of factors.  These include central bank decisions and government policies such as taxes.   They can even include impact from recent or projected political upheaval.  An in-depth  understanding of the foreign exchange and all of its intricacies is key

Summary

These factors only scratch the surface on what you need to understand.  Trading futures is not a decision to be made lightly.  However, if you’re willing to put in the effort, you can consider entering the futures market. Skills and knowledge are key to success.   You should also understand that futures trading brings more risk than many other investments.  For some, that is a reason to stay away.  But for the right investor, it could be a reason to consider trading futures.

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1 thought on “Three Factors that Affect Futures Trading

  1. Thank you so much for sharing. I can’t say that I’m well versed with futures trading but this is an excellent overview of what to look for. It sounds like in many ways Macro events really drive the prices more than anything which is super interesting. Once again thanks for sharing.
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