Advantages of Futures Trading

High Leverage: A key advantage of futures trading, and indeed all forms of derivatives trading, is the role of leverage, which amplifies the size of each transaction without requiring a further margin deposit from the trader.  Effectively, leverage means you can trade in much higher volumes without actually having the capital in deposit to cover your trades, allowing you to capitalise on smaller movements in market pricing.  Leverage has single-handedly made many a trading millionaire, and it forms a key component of a bulk of modern day trading and fund investing.

Low Commission Charges: Compared to other trading instruments, futures trading also benefits from comparatively low trading costs, with commissions seldom as high as the alternatives.  This allows the trader to focus more on earning their profit portion from each trade, rather than worrying about covering a chunky commission portion for each and every transaction.

Highly Liquid Market: Traded on futures exchanges, futures contracts are extremely liquid, with a very high turnover of buying and selling taking place throughout the trading day.  This means it’s easy to close out positions when you want, and there is very limited delay in reversing positions (as there would be with less liquid asset classes).

Transparent Market: Unlike share dealing, trading in the futures market is virtually guaranteed to be a more transparent, more open and legitimate market.  While it might be easy to get that juicy tip-off from the city, it’s virtually impossible to get insider information that could impact on the integrity of the market, particularly in light of the timeframes involved.

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