How to Buy Futures – 10 Steps for Beginners

Are you confused about how to buy futures? Well, you are at the right place. In this blog, we will tell you ten simple steps for futures trading online! So, let’s kickstart your future investments, shall we?

10 Steps to Buy Futures for Beginners

It is not rocket science to understand how to buy futures. With the internet making online trading possible, you can use any trading app for futures trading! However, you need to remember that there are some prerequisites and protocols before you dive into futures trading. We have compiled and divided them into ten steps for your ease, so go on!

Step 1: Understand the Functioning of Futures Trading

Undoubtedly, futures are one of the most complex financial instruments, and it would be folly to buy and trade them without understanding how they work. You need to be well aware of all the costs, risks, and functioning of the futures before you begin trading them.

Step 2: Fix Your Investment Amount

It is essential to set a budget for future investments. Once you decide on how much money you are willing to invest, you can find trading strategies that suit your investments.

Step 3: Decide on Your Risk Appetite

The third step is answering how much risk is too much for you. Futures can be lucrative, but sometimes, you may even face losses. In these scenarios, you should be able to judge the amount of loss you are willing to suffer. Never trade beyond your risk appetite!

Step 4: Identify Your Trading Strategy

There are several strategies that you can employ in trading futures. However, remember you pick one before you start futures trading online. The most commonly employed futures trading strategies are going short, going long, and calendar spreads.

Step 5: Practice Trading on Simulators

When you believe you are all set to trade in futures, it is time to test your research and understanding. You can use any simulation app for futures trading and obtain first-hand experience!

Step 6: Open Your Trading Account

After thorough research, choose a trading account that suits you the best. Find out the account opening fees and annual fees, if any.

Step 7: Arrange the Margin Money

Margin money is typically between 5 to 10% of your futures contract size. When dealing with futures contracts, a margin money deposit acts as a security and is a prerequisite for buying any futures.

Step 8: Deposit the Margin Money

Once your margin money is arranged, you can deposit this amount and proceed to the next step. Once you transfer this money to the brokerage account, your broker will transfer it to the stock exchange.

Step 9: Get Set Go

It is time to buy futures. You need to set the number and size of the contracts you purchase. You will also have to set the strike price and the contract expiration date.  The strike price is the predetermined price at which you can buy or sell your futures contract, and the last date on which you can trade this contract is the contract expiration date.

Step 10: Settle Contracts

Settling contracts can be done before the expiry date or on the expiry date.

Conclusion

These are the ten steps that will help you carry out futures trading online seamlessly. Remember to evaluate all the risks and make calculative decisions!

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