Some things to consider before trading futures:
Leverage: Control a large investment with a relatively small amount of money.
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This allows for strong potential returns, but you should be aware that it can also result in significant losses.
Diversification: Access a wide array of investments including oil and energy, gold and other metals, interest rates, indexes, grains, livestock, and more.
After Hours Market: Futures markets trade at many different times of the day.
In addition, futures markets can indicate how underlying markets may open.
For example, stock index futures will likely tell traders whether the stock market may open up or down.
Liquidity: The futures market is very active with a large amount of trading, especially in the high volume contracts.
This makes it’s easier to get in and out of trades.
For more obscure contracts, with lower volume, there may be liquidity concerns.
Hedging: If you have an existing position in a commodity or stock, you can use a future contract to protect unrealized profit or minimize a loss. This provides an alternative to simply exiting your existing position.
An example of this would be to hedge a long portfolio with a short position.