Futures Basics

Futures basics start with understanding that a futures contract is an agreement to buy or sell an asset at a fixed price on a future date. These contracts are commonly used for commodities, stock indices, currencies, and more. Traders use futures to speculate on price movements or to hedge against market risk. Because futures are traded with margin, they allow control of a large position with a smaller amount of money, which increases both profit potential and risk. Prices can move quickly, so losses can also grow fast. Beginners should learn contract terms, margin rules, and risk management before trading futures.