The futures market is a new but thriving market with FX, stocks, currencies, commodities, the entire world of derivatives and more. Like the stock market, the futures market is open 24 hours a day so trading can happen anytime, day or night.
There are a few things to remember before you get started in the CFD market. Take the time to learn about the commodity being traded, how it is priced, and how you can benefit from being the middleman. It is not necessary to be familiar with all the various aspects of commodities, in fact it is better to know what your business is before you enter the commodities trading arena.
There are certain contracts, known as futures contracts, that you must know in order to trade. For the CFD futures market, the most common contract is the call and put agreement.
Your business may consist of the call and put market where a futures marketer will buy a contract for a particular commodity, put it on sale, and make a profit on the difference. When you take the call option, your contract will be sold.
When you choose to take the put option, your contract will be put on sale. If you are in the process of calling the futures contract, you can actually set a stop date to complete the transaction.
The CFD futures market was established by the Financial Industry Regulatory Authority (FINRA) in the late nineties as a way to trade a traditional stock for a foreign currency. Since then, the CFD has been seen as a growing business, not only on the American continent but also in other parts of the world, including the UK and the Middle East.
In general, the CFD is a purchase of the contract at the strike price, i.e. at the price of the contract is set to be at at the end of the day, and the agreement is at a strike price.
A CFD is a more liquid option for those traders who trade futures on the OTC Bulletin Board (OTCBB) as opposed to trading on the Forex or Foreign Exchange markets. They allow a trader to enter and exit a contract without actually trading.
When you purchase a contract, you must either have a call option or a put option on the futures contract. At the end of the day, you have to take one of the options and set a sell stop and there is no immediate action. This gives you the luxury of time to go through a closing process before actually making the trade.
As with most commodities, the CFD futures market has its ups and downs. There will be times when the contract is sold at a very low price, at times when the price spikes upwards and there will be times when there is a sell off that causes a good rally.
A CFD is a great way to go into trading when you want to trade the commodity without putting up too much capital. Also, you don’t have to commit to the long term when you decide to trade the commodity as the contracts are one time only. You can take the market option to the beginning of the deal and place a stop at the end.