Futures trading is always a risky business, that much is clear. Anyone who says there are no risks at all is either not aware or trying to sell you something. The truth is that trading futures is a risk. You never know when you will win or lose. Playing this game based on the cards you have and hoping for the best is the best way to win.
If you win at futures trading, you can make a lot of money, which is likely why so many people are interested in it. But if you are new to futures trading, you are just as likely, if not more likely, to lose a lot of money.
I talk about the four biggest risks of trading in futures. You might want to learn more about futures trading before you decide if it's right for you.
- Business on the Edge
Futures trading is a form of gambling. Even if an expert tells you something or makes a prediction, it may not always be right. Don't put too much stock in it. The best way to invest is to not put all of your money in one place. Instead, you should spread it out among different financial instruments.
- Help with money
Futures trading requires a large amount of money up front, which can be spent. So, it is not for people who are easily scared. If you want to pay your bills, you shouldn't try to make money trading futures. You shouldn't use money that you need for bills, loans, or groceries to play around with futures trading. Don't spend more money than you can afford to.
If you want to trade futures, you should ideally have at least $10,000 USD in your personal trading account.
- Knowledge of technology
For futures trading, you need to know a lot about how financial instruments work. At the very least, you should know about the four main types of investments: those that pay you money, those that grow, those that you bet on, and those that protect you from inflation. If you don't know enough about the market, you'll be limited in where you can invest and could lose money in a certain part of the financial market.
You might think, "My broker is always there to give me advice." Even though it's good to get advice from someone who knows what they're talking about, you should be able to make smart decisions on your own. The only way to do that is to know enough.
- Invest only what you can afford to lose.
Because of the risks, I wouldn't tell someone who is new to trading to try their hand at futures.
You should have a portfolio that is well-balanced and only put a certain amount of money in futures. My advice is about 10 percent, but it depends on how much money you have and how you plan to invest it. In general, you should only trade futures with money you can afford to lose.
The four main risks I talked about above are not meant to make you not want to trade futures. What I want to make sure of is that you know all of the risks and what you need to do to improve your chances of winning when you trade futures.
