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How Does the Futures Market Work?

The futures market is a global marketplace that is constantly operating 24 hours a day, seven days a week, 365 days per year. The market continuously thrives, with an equal amount of supply and demand, and an expanding selection of futures brokers and available investments. With the proper training, investing in the futures market can be extremely profitable and enjoyable. In fact, many people have been able to generate a full-time income by investing in the futures market on a daily and weekly basis. The futures market is comprised of a large chain of individuals and firms, each one with their own special role that facilitates the completion of buying, selling, and trading futures contracts and options. The following paragraphs will adequately answer the question "How does the future market work"?

Understanding Futures Exchanges

Within the futures market there are independent platforms known as futures exchanges that allow investors to perform all of the actions associated with futures trading. Each futures exchange has its own regulations and guidelines that must be adhered to, along with the rules set forth by the CFTC (Commodity Futures Trading Commission). Since you'll be obligated to comply with the guidelines set forth by the futures exchange and other authorities, it is important to understand the most important rules beforehand. Each futures exchange specializes in a specific list of investment products, and each specific product has its own designated trading pit. Each trading pit is further categorized based on the contract months and various other factors. The futures exchange is the central component of the futures market, ultimately deciding the length and specific terms of each futures contract. To actually trade hands-on within a futures exchange or trading pit you'll either have to obtain the proper credentials and visit a physical marketplace, or you'll have to seek the assistance of a professional online futures broker.

Understanding Futures Brokers

It is important to note that futures contracts must be bought, sold, or traded within a futures exchange, and without the proper credentials this is impossible to do. Of course, most people are not willing to visit a physical trading pit, register for an exchange membership, pay annual fees, and obtain credentials from various regulatory agencies before beginning their futures trading endeavors. Futures brokers act as mediators between average investors and futures exchanges within the futures market. Without professional futures brokers, most people would be unable or unwilling to go through the necessary steps in order to buy, sell, and trade futures contracts and options. Futures brokers not only have the necessary certification requirements to conduct trades on your behalf, they also can streamline the process through online trading platforms that allow you to make deposits and gradually invest.

Futures Market Regulatory Authorities

The rules and regulations of the futures market are legislated and maintained by the CFTC (Commodity Futures Trading Commission), which oversees and governs all futures related operations, including futures brokers and exchanges. The commodity futures trading commission is a federally empowered agency that holds jurisdiction over the commodities markets in the United States. Another organization that is partially responsible for futures legislation and regulation is the National Futures Association (NFA), which is a national association responsible for maintaining industry standards for professional conduct and financial accountability amongst organizations and individuals that engage in activity within the futures market. The NFA conducts routine audits, continuously records and monitors trading practices, and provide a platform that handles disputes between investors related to the futures market.