How do you invest in futures?

and what are good futures to invest in?|||To invest in futures (or, more precisely, to speculate in futures), you need to open an account with a futures broker. The good futures to speculate in are the ones whose price change you can forecast better than a random guess does.|||ING DIRECT 4.5% SAVINGS ACCOUNT|||If you're a beginner at investing in the stock market, then I would recommend to you to start with stocks because futures are better left for more experienced stock market investors or for sophisticated investors. Otherwise, you could easily lose your whole capital. I hate to be mean, but, if you have to ask this question, you are probably not ready to invest in futures.|||Muga is correct. Futures are not for the timid or faint of heart. The majority of stock traders would never make it in the futures market because they don't have the right disposition. Futures trading requires a VERY HIGH risk tolerance level and the majority of people do not have that.





I'll give you an example. Let's say you think XYZ Corp. stock is going to go up and you buy 1,000 shares at $25 per. You spent $25,000. Let's say you're wrong and the stock plunges to $10 per, so you sustained a $15 per share loss or a $15,000 on 1,000 shares. That's a lot of money to lose. Now, let's take a futures trade. Let's say you're looking at Crude oil and it's trading at $82 and you think it's going to go up. The margin is about $4,000 (in futures, margin is a good faith deposit to cover the futures position). So, let's say you margin 6 contracts for a total investment of $24,000. Let's say you're wrong and crude drops to $75. Do you know how much you've just lost? In futures, the price is per what ever number of units the contract controls. So, you sustained a $7 loss ($82 - $75 = $7). Now, that's $7 per barrel - 1 contract controls 1,000 barrels so you just lost $7000 per contract. Multiply that by 6 contracts and you just lost $42,000. Now only did you lose the entire $24,000 margin, but you now need to come up with an additional $18,000 to cover the balance of the loss. Futures contracts have the potential for both Unlimited GAINS as well as Unlimited LOSSES.





Futures are among THE RISKIEST investment vehicles there are, you BETTER KNOW WHAT YOU'RE DOING if you trade them. But, only you can decide if they are right for you. Do A LOT of research into them to see if you have the temperment and risk tolerance levels to trade them.





With that said, the best futures to trade are the ones with high liquiditiy. If you need to get out of a trade, you may not be able to in a thinly traded contract. In the very liquid contracts, you'll be able to get out now problem. For example, Eurodollar, S%26amp;P 500, 3 month Euribor, 30 day Fed Funds Rate contracts are very liquid while Lumber, Sugar and Cattle contracts are very thinly traded.





Hope this helps