What To Know Before You Trade

The popularity of trading futures and options has been growly rapidly for several years. The availability of online data is constantly updated fever was increased by day traders to try to succeed and make money on this risky investment area. Individuals can now trade these markets with the same ease and speed of large companies.

trade currency futures (foreign currency) and raw materials and options are not for everyone. This is a complex and risky experiences more volatile changes in value. Before you invest your money in Forex, commodity contracts or options contracts, you should:

• Consider the experience of financial trading, objectives and financial resources and know how much you can afford to lose above and beyond your initial fee.

1. Understand commodity futures and option contracts and your obligations before committing your finances to commercial contracts.

2. Understand your risk exposure and aspects of the negotiation by examining in depth the risk disclosure documents your broker is required to give you.

3.Know who to contact if you have a problem or question.

4.Ask more questions to gather more information before opening an account.

Commodity futures and options contracts:

A futures contract is a legally binding agreement between two parties to buy or sell a specific financial product or commodity in the future, in a designated market, for a given quantity of a commodity at a specified price. The buyer and seller of a futures contract is an agreement today on the price of a product to be delivered or paid by a date and time fixed in the future, which is known as the "settlement date." actual delivery of the commodity can take place in the contract, but most contracts are actually closed, or "offset" before delivery.

An option on a futures contract is a legally binding agreement between two parties giving the buyer pays a price determined by the market is known as a "bonus" to the right (but not the obligation) in a prescribed time to exercise its control. The exercise of the option will result in the person deemed to have entered into a futures contract at a specified price known as the "strike price." In some cases, an option entitles the holder to buy or sell the underlying asset directly, and these options are called options on physical assets.

United States, a person can not trade futures and options on futures contracts directly on an exchange. A person or company shall act on your behalf. People and companies acting on your behalf as a customer generally must be registered with the Commodity Futures Trading Commission.

Two general categories of profit and loss accounts:

1.Individual account. In an individual account, trading is only for you. The individual account can be configured as an account "nondiscretionary" or "discretionary." A "non-discretionary" account, which means that it will all business decisions and the agent can not carry out operations without prior approval and consent. A "discretionary" individual account means you give permission to the broker firm in charge of your account or a third party to make business decisions on their behalf.

You can open an individual account registered Futures Commission Merchant or Introducing Broker. Introducing Broker may accept orders and send them to the chief executive of the Futures Commission Merchant with the introduction of the broker has a relationship. You can deposit funds directly to the Futures Commission Merchant. In an individual discretionary account, you grant power of attorney, the Futures Commission Merchant, Broker presentation of one of their associated entities, or a Commodity Trading Advisor to make trading decisions on your behalf.

Commodity Pool. You can also trade in products through a "commodity pool." That means you buy a share or interest in the pool, and the operations performed for the group as a whole, rather than for people who have interests in the pool. Pool participants share gains or losses.

If you have a dispute or problem arises on account of commodity futures or option, first try to resolve the problem with your broker. If not successful, then you have options of conflict resolution:
(1) the CFTC reparations program; Industry Arbitration
(2), has sponsored or judicial action
(3). When choosing a particular approach, one can consider the cost,length of time required and if the attorney is required. More information on dispute resolution is available at the CFTC Proceedings office.

A checklist "Before Trade"

Make sure:

1.Clearly identified financial goals, including the amount of risk and loss can be treated?

2.Determine assistance and how it can help a business consultant to make business decisions?

3.Checked registration status and disciplinary history advisor or pool you choose with the National Futures Association?

4. Received and carefully reviewed the disclosure document - before opening an account?

5. Understood the disclosure document, including a statement of expenditure, the potential loss of their right to withdraw their funds and the business model?

Be sure to ask for what you do not understand. Remember, it's your money, make sure you know where it goes.

Call the NFA and CFTC with any questions you may have?

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