ALEXANDER PEACE - BEGINNERS GUIDE TO TRADING: This Book Includes: Day, Forex, Options and Swing Trading for Beginners. Learn Psychology, Tips, Tricks How to Start Investing and Create a Passive Income from Home.

Futures are agreements created to either purchase or sell a particular security at a later date and at specific prices. Futures are normally traded on an exchange similar to stocks and options. An individual commit to purchasing a certain amount of securities or assets, and the seller undertakes to deliver the same at a future date. People who engage in trading futures include investors, companies as well as speculators.

Just like options, futures represent derivatives of an underlying stock. This means that the price of a futures contract changes depending on changes in the underlying instrument. The process of day trading futures is different from trading stocks because when trading futures, you do not get to own the shares associated with the lying instrument.

There are several reasons why people engage in day trading using futures. Some of these include:

• Low prices when day trading stocks, the capital requirements are too high. However, you do not need a lot of capital to trade in futures. You can start trading with as low as $5000, or less depending on the trading platform.
• Price changes with the underlying security the amount of profit you make from day trading futures is determined by the price changes in the underlying security. This implies that you can use technical analysis strategies to leverage the income you receive from trading futures.
• No short-selling restrictions short-term traders often depend on each trade to realize some good profits. When trading futures, there are no restrictions on both long and short trading positions. This means that you can apply market analysis information on all kinds of futures. This is not the case with stock day trading since you must have stock in place before selling it at a profit. This restriction makes it impossible for you to short-sell when trading stocks.

To start day trading futures, you need a few tools and resources similar to those required when selling stocks. There are minimum capital regulations to be met, and you must also work through a broker. Once you identify a broker, you will need to select the kind of futures contract you wish to trade. When doing this, there are several factors that you must consider including the volume of trade and previous price movement of the futures contract, among others.

There are several risks involved in day trading futures as well. Most traders always borrow capital to invest in the futures market because of the substantial profit margins involved. Small price changes still result in exponentially significant returns. However, trading in futures using borrowed money always results in high risk. If the market direction does not assume the expected direction, you will end up losing the borrowed money. Futures possess a high leverage potential that traders take advantage of. This leverage presents a high-profit potential, but also creates a platform for more significant loss.