What Is Futures Trading?
Futures trading refers to derivative financial contracts. It is a mutual agreement that both parties undertake to buy and sell an underlying asset at a specific price at a future date. Both parties are obligated to buy and sell the asset. Because there is a predetermined price for the asset at a future date, both the buyer and the seller must honour the agreed-upon price at the date of expiration (regardless of the current market value).
When you trade in a futures contract, it allows you to lock in a predetermined price of the asset or commodity in question. If the asset increases in value over time, whereas the contract stipulates the asset must be sold for less than the current value, then the buyer of the asset will stand to gain. Alternatively, if the asset or commodity price decreases relative to the price stipulated in the futures contract, the seller will stand to gain.
Ultimately, you are speculating on the future price movement of the underlying asset or commodity. Although speculation is risky, there are a number of factors that one can take into account when assessing the future prospects of the asset/commodity you wish to buy or sell. However, it is possible to gain insight into extenuating circumstances that may well affect the price one way or another. It’s important to narrow your focus and establish key markets that you wish to trade futures in. This will allow you to stay abreast of all the latest developments as well as tracking market data and staying in the loop with commentary.
Types of futures contracts
Futures refer to the entire asset class. However, you’ll find that there are a number of different types of futures that can be traded.
Commodity futures are popular and include futures on corn, wheat, oil, and more. You can also trade stock index futures such as the Dow Jones. You can trade in global currency futures such as the Euro and Dollar. You can also trade in precious metal futures such as gold, or you can buy and sell U.S. Treasury futures.
Advantages Of Future Trading Australia
There are always certain upsides and downsides when it comes to trading any type of product. You’ll find this with cryptocurrency trading Australia, too. In terms of using a futures trading online broker, you’ll find that there are a number of advantages when it comes to futures trading.
Markets are liquid
Contracts are traded in huge volumes on a daily basis. This also means that there are a wide number of buyers and sellers, making futures markets very liquid. Thus, it’s easy to execute market orders at a moment’s notice. What’s more is that futures markets trade for prolonged hours, giving you access to markets outside of normal trading hours associated with other markets.
Futures instruments can be leveraged highly
Ultimately, it is possible to explore yourself too much more value as opposed to when you buy a stock outright. This is due to the fact that you’ll need to put down a percentage of the total amount – known as a margin. However, the margin will only be 10% (for argument’s sake). Thus, you are immediately exposed to a far higher value of stock than what you’ve actually invested. If the stock moves in the correct direction, the associated profits are also amplified.
Most brokers implement low commission rates
You’ll find that the best trading online broker will have a commission rate that is very low. Thus, you can get away with paying a rate of 0.5% of the overall value of the contract. However, it has also been noted that a number of online brokers are now offering commission-free trading on ETFs and stocks, so you might find this to be less appealing. But, as you can expose yourself to a high value without investing a huge amount of capital upfront, these rates still entice many traders.
Using futures allows you to diversify your holdings and reduce risk
You can minimise the risk involved in investing in single stock options by investing in futures contracts. The inherent nature of futures contracts allows traders to hedge risk and allow you to reduce the cost involved in purchasing a stock outright.
Possible to make short-term gains
If you manage to place informed trades at the right time, you can make money speculating on futures contracts. As we’ve alluded to, your exposure is up to 10 times higher than when you’ve invested in normal stocks. If the asset moves in the right direction, short-term gains can be exponentially higher.
Disadvantages Of Future Trading Australia
There are always disadvantages to any trading product. As there are potential upsides, the disadvantages sometimes outweigh the attractive prospects that trading products symbolise.
Timing is difficult
Keep in mind that a futures contract has an expiration date. If the contract determines fixed asset prices, you might find that these prices become less appealing as the expiration date approaches. Other asset prices will yield more value at this point in time. However, you’ll now be stuck with a contract that expires with negligible asset prices – rendering your investment as worthless.
Leveraged positions can induce high losses
Yes, it’s possible to expose yourself to stock values that are much higher without investing a big amount off the bat. However, leveraged positions can also prove costly if the asset price moves in the opposite direction to what you had thought it would. If your margin account falls below the minimum requirement, you’ll need to fund your account by transferring more funds from your cash balance. This can lead to you spending more money than you had hoped.
Complex trading product for newcomers
Using a futures trading online broker to trade in futures is a complex task. This makes it more risky for newcomers who have not yet traded online. Although there are opportunities that arise when trading futures, it is vital that you understand the inner-workings of futures contracts before you decide to trade. It is imperative to follow all the latest developments, internal and external, that may affect the underlying asset of any futures contract. Without the desire to stay on top of these constant changes and possible
Finding A Futures Trading Online Broker
When it comes to finding futures trading brokers Australia, it is important to consult a number of resources instead of signing up with the first futures trading broker that comes your way. At Wetten.com, we have taken the time to understand the current market players in a bid to bring you the best futures trading brokers Australia. It is our mission to regularly update our site in order to capture the latest trends, offer, and online brokers that impress. Below, we’ve outlined the best brokers. Find out more about forex trading Australia or cryptocurrency trading Australia if this interests you.
Best Futures Trading Brokers Australia
We have narrowed down the competition to find the best futures trading online broker. Although we haven’t singled out one broker, below we have highlighted three of the best. Keep in mind that the best futures trading online broker might well be different for one person as opposed to the next. It is important that you use our list of the best future trading Australia as a reference point. From there, you will need to identify which online broker caters to your trading preferences.
Charles Schwab is a world-renowned online broker. You will have access to a number of exciting trading options, including futures contracts.You can trade in over 100 futures products across a number of different categories. This list includes categories such as financials, metals, energies, and agriculture. With competitive commission rates for futures contracts and futures options, it’s a great futures trading online broker. They also provide you with a massive collection of educational resources and dynamic futures trading tools.
This futures trading online broker provides you with access into liquid futures markets where a number of diversified investments are up for grabs. TradeStation also has competitive trading fees and has implemented a cost-friendly commission rate for futures contracts. You can get away with paying as little as $0.80 per contract, per side with the TS Go account. You’ll also have around the clock (just about) access to all major futures exchanges. As you advance, you’ll also find it is possible to access increased leverage; allowing you control a large number of notional funds with relatively less capital at hand.
TD Ameritrade is a giant in the online brokerage world. It is also one of the best futures trading online brokers around. It is important to note that the commission for futures contracts is slightly higher when using TD Ameritrade. However, you’ll have access to an online platform that boasts a huge functioning capacity and facilitates seamless trading with innovative tools. You can trade over 70 different futures products and will also be able to trade E-mini Index Futures – allowing you access to the market at a lower cost with smaller margin requirements.
Frequently Asked Questions About Future Trading Australia
Below, we have summarised some of the most frequently asked questions about futures trading. This includes the actual trading of futures and questions pertaining to a string of online futures trading brokers that you’ll come to know well within the Australian context.
Is futures trading the same as options trading?
No, it is not the same. However, there are certain aspects that are very similar in nature. Both futures trading and options trading are trading products that allow traders to hedge their current investments. An option gives the buyer the right to buy, or sell, the underlying asset at a specified price at a future date. However, the buyer of an option is not obligated to purchase or sell the asset – thus, they have the ‘option’ to do so.
In terms of a futures contract, the buyer is obligated to purchase the underlying asset at the agreed-upon amount at a specified date, while the seller is also obligated to sell the asset. The only way in which the transaction might not be completed is if the holder’s position is closed prior to the expiration of the contract.
Where can I find educational resources about futures trading?
There are a wide range of educational resources available to online traders. However, there are certain sites that provide in-depth resources which are concise and to the point. This allows you to absorb important information without being bombarded with unnecessary facts.
We recommend that you use Wetten.com for all your financial questions pertaining to future trading Australia, and trading in general. You will also find a raft of educational resources on your chosen online trading site. The best futures trading online broker will have invested heavily in providing you with the ammunition needed to engage in informed trading.
What are acceptable fees associated with futures trading?
There are a number of fees that you will need to take into account when using an online trading platform. However, a number of the best futures trading brokers Australia will take a relatively small commission for each contract, per side. We found that a competitive rate for futures contracts hovers around $1.50 – $2. If you can get away with this, then you should be pleased. Keep in mind you might pay more or less depending on the trading account that you have.
How do I sign up to the best futures trading online broker?
Signing up with one of the best futures trading brokers Australia is relatively easy. All you need to do is visit the official website of the online broker you wish to join. From here, you can follow the online registration process without having to spend much time completing it.
All you need to do is provide your online trading broker with your personal details and make sure that all the information is correct. You can link your trading account to an account that you will fund your trading account with, and you’re all set to start trading. This process is the same when signing up with an options broker.
Be Sure To Stay Informed
One thing we have noticed among traders, particularly those who tend to trade on a semi-regular basis, is that many do not continue to consult resources, tips, and weekly insights. Market changes are always afoot and the landscape of online trading is always in a state of change.
Thus, once you have mastered the basics of trading terminology, it is important to continue the learning process. This is even more prudent when considering complex derivative products associated with futures trading, CFD trading Australia, and more.
At Wetten.com, we have undertaken the activity of bringing you the latest in online trading with special reference to the Australian market. Included in this, we’ve pushed to expand our coverage to include handy guides that will help you master the art of online trading.
We urge you to continue to read the resources at hand so as to gain a deeper insight into the industry at large. We’re also keen on the fact that online futures trading brokers Australia provide you with ample educational resources and tools – enabling you to improve your general understanding and shape successful trading strategies.
Our guide to future trading Australia, along with our coverage of the top futures trading broker, has hopefully been of great value to you. We are always optimistic that these guides will spur on your interest in online trading and enable you to take on a variety of trading options with personal strategies.
Futures trading may be daunting at first – with associated risk which is always present – but the short- and long-term gains can prove to be substantial. If you happen to find futures trading appealing, we recommend you head over to our futures broker coverage, where you’ll find out more about the best futures trading brokers Australia.
If you’d like to find out more about other trading topics, we’ve got a handy guide on the top day trading broker as well as an in-depth piece on social trading sites. Be sure to stay informed by visiting Wetten.com whenever you’re able to. We will be sure not to disappoint with an ever-expanding range of online trading references.
Future Trading Australia FAQ
💥What is future trading?
When it comes to online trading, you’ll find a number of different trading options on offer. You can invest in options, stocks, contracts for differences, and futures – with a number of other options on hand. Futures trading might not be your first port of call if you are a newcomer to online trading. However, you might gain confidence quickly and will want to engage in future trading Australia. Visit Wetten.com to find out more about futures trading and which online stock brokers offer the best online futures trading services.
👉Is there an online futures trading broker?
Yes, there are a number of different futures trading brokers Australia. However, not all of them are cut from the same cloth. Thus, we’ve gone to great lengths to find the best brokers for futures trading in Australia. All you need to do is visit Wetten.com and read up about those brokers that appeal to you. We’ll outline all you need to know about each individual broker so that you can choose the best broker for you. Be sure to stay in the loop with us.
💰Are online futures trading brokers expensive?
Each online trading broker will have a different fee structure. Keep in mind that you should not be charged to create an account with an online broker. Many of the top futures trading brokers Australia provide you with the option of opening a free account. Once you’ve done this, you’ll need to fund your account in order to make real money trades. Plus, you’ll find that there are a variety of fees attached to trading and you might incur certain account fees, too. To find out more about this, you can read our online broker reviews or check out our comparison of the best brokers for futures trading!
📚How do I learn more about futures trading?
The internet is full of information relating to online trading. However, there’s no need for you to spend hours searching for reliable sites that may provide you with decent insight. In order to learn more about futures trading, you can visit Wetten.com, where we provide you with a complete overview of online brokers and online trading in Australia. We cover all the important topics and bring you a range of featured online brokers. This will enable you to put your knowledge into action and start trading online.
💡Can I make money from futures trading brokers Australia?
The idea behind online trading is that you manage to make a return on your investments. However, it is also possible to use a demo account where you can learn how to trade without fronting capital. Ultimately, you’ll want to progress to making real trades in an effort to make money. At Wetten.com, we will be sure to point you in the right direction as to where you can begin your online trading venture. After consulting our resources and online trading coverage, you will be able to find a great trading platform.