Stock futures can be a great way to make long-term investments. However, if you want to get into active trading, buying and selling stock futures is also a great way to make money. If you’re interested in learning how to buy stock futures online, this overview provides the information you’ll need to get started.
What Are Stock Futures?
Stock futures are contracts that work as an agreement between traders to buy or sell a stock at a future date for a price both traders agree on. Stock futures contracts are typically traded on a futures market, where one party agrees to purchase a specific amount of securities for a set price on a future date. Many different kinds of investors trade in stock futures, especially speculators and companies that want the physical commodity or want to supply it.
How Do Stock Futures Work?
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Stock futures allow traders to secure a price for a specific commodity to protect against the possibility of fluctuations down the road. Even though futures are typically exchanged at some point in the future, many speculators and day traders look to make a profit off of the price fluctuations of various contracts specifically.
So if the price of the commodity increases, the stock futures contract becomes more valuable as a result. This means you could sell it for a higher price within the futures market. Since day traders buy and sell futures daily, there is a potential for significant gains.
Buying Stock Futures Online
Start by creating a virtual trading account through a reputable platform. Use a trading simulator where you can practice buying stock futures online with paper money before you actually start futures trading. Since futures trading can net you a physical commodity, it’s important to learn how to actively trade without ever having to sign for physical commodities. Practicing before you really get into trading can also help you learn how the market works and how to analyze and manage a portfolio.
Opening a Managed Account
If you’re getting started investing in stock futures, consider opening a managed account with an online stockbroker. You can work with an experienced professional who has deep knowledge of the market — stock futures specifically — to help you manage your portfolio. A managed account is beneficial because once you have established your account, a stockbroker can actively trade on your behalf with the most effective strategies for investing in stock futures.
Investing Through Commodity Pools
Another way to buy stock futures is to invest in a commodity pool. A commodity pool works much like a mutual fund does where a group of investors combine, or pool, their funds together within the same stock portfolio. A team of stockbrokers would manage the pool, and these professionals have the expertise needed to navigate the particular commodity that you’ve invested in. A commodity pool offers less risk than a managed account because instead of being solely responsible for profits and loss, you’re invested with others and share a common portfolio where brokers manage these details for you.
Investing in stock futures does carry some risk, but when you practice with a simulator, use resources to learn, and work closely with a stockbroker, you can make sure you have the potential to earn a profit.
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