Hitchhiker’s Guide to CapitalXP Review on Trading Futures

Here are a great option if you are looking into adding variety to your day-to-day trading activities. You gain profit by successfully predicting the future value of a commodity or an index fund. Sounds complicated, doesn’t it? Thankfully, CapitalXP offers exceptional online resources for education and you can even request a one-on-one tutelage from our experts. But if you want to determine if this avenue is worth your time, let’s review the basics..

Terminology/Definitions

Starting out when you don’t know what’s what could be intimidating. That‘s okay. Here are the most commonly used terms:

  1. A tick – this term describes the minimal change of price, regardless of if it rises or falls. Ticks could vary from 0.0001 to 1 or more. It largely depends on the goods being traded, same as
  2. A tick value – basically how much a tick is worth.
  3. Margin – here it is a whole different thing, unlike margins on the stock market. It’s a security deposit of sorts. It‘s lower than full price of the contract. It could be anything from 5% to 15% or more, depending on how strongly market reacts to changes. How much you need to pay initially is in direct proportion to the veracity of the market fluctuations. There are also maintenance margins which are slightly lower than initial margin. Basically, it is the lowest amount your account can reach while you are taking part in the trading.
  4. Leverage is a ratio of a maximum price of a contract to the amount of your margin.

A tick – this term describes the minimal change of price, regardless of if it rises or falls. Ticks could vary from 0.0001 to 1 or more. It largely depends on the goods being traded, same as

  1. A tick value – basically how much a tick is worth.
  2. Margin – here it is a whole different thing, unlike margins on the stock market. It’s a security deposit of sorts. It‘s lower than full price of the contract. It could be anything from 5% to 15% or more, depending on how strongly market reacts to changes. How much you need to pay initially is in direct proportion to the veracity of the market fluctuations. There are also maintenance margins which are slightly lower than initial margin. Basically, it is the lowest amount your account can reach while you are taking part in the trading.
  3. Leverage is a ratio of a maximum price of a contract to the amount of your margin.

Commodities

Commodities mean goods, practically interchangeable between various suppliers. Typical examples include petroleum, natural gas, precious metals, agricultural goods (grain, meat, and so on).Your objective is to trade a future contract before a set date. What’s the difference from any other exchange? For one, traders are not interested in being a final buyer. The date when goods are scheduled to be delivered signifies a comparatively short shelf life of this contracts.

The trick to it is to predict if the price will rise or fall over the next period of time. And there are various instruments for such analysis. But you can use even just your common sense. For example, in 2018 carrots were selling for quite a price because of such a hot and dry weather. Usually UK grows most carrots domestically, but in 2018 that was not the case. But when the time come to receive carrots imported from Poland, prices predictably dropped. So if you bought futures contracts for carrots during the winter, sold before mid-summer, then you made a substantial profit.

Index and Forex

The subject of the index futures trade is a financial or a stock index (S&P, Nasdaq, FTSE and so on). The point is either to reduce the risk on the price drop for a group of stocks or to speculate on them.
Forex futures are a predetermined amount of currency with a fixed price and specific date of expiration. You really can’t find a better tool for managing risks if you have pending payments in that currency in the future and for general purpose of speculation on the currency exchange both.

That’s the basics of futures down. Now is the time to open account on CapitalXP platform if you’re interested in learning more and implementing the knowledge in a profitable way.