The futures market is a market where trades conduct at the current moment for commodities traders.
For this reason, the commodities futures and options market is perhaps the most volatile of all the markets. A greater opportunity for profits is always accompanied by a higher potential for loss (risk).
Leverage (using equity to trade) and options (exercise your right at any time before the period expires) in futures further aggravates the volatility of results.
There are some attributes that many successful commodities traders have in common according to thebalance.com.
A Willingness to Learn Futures and Options
The most important exercise for those considering investing or trading in the futures and options markets is to spend lots of time learning the ins and outs of futures. And also, the exchanges that offer these financial products.
Knowing the Margin Requirements
The margin is a good faith deposit required by exchanges on the products they offer for trading. Some commodities require a maintenance margin (payments if the value falls below a certain percentage).
For example, if a gold contract for 100 troy had a margin of $4,950 and a maintenance margin of $4,500, an investor would purchase the contract for $4,950 (the margin) while maintaining a value of $4,500 in the account (the maintenance margin).
If the value falls below $4,500, the investor must place more cash into the account or sell off shares to make up for the difference. At this point, this is the definition of a margin call.
Have Insights on Commodity Frequencies
Commodities traders use fundamental analysis of commodities to determine the feasibility of purchasing or selling. Understanding futures, options, supply and demand, and their influence of these raw material markets is of primary importance.
An Awareness of Commodity Attributes
Each commodity has a set of idiosyncratic attributes. So, it is important to understand exactly what a trader or investor is buying or selling.
The exchanges offer an abundance of information on price, volume and open interest in each of the contracts they offer. It is important to understand this data and use it when analyzing these markets.
Use of Trading Platforms
Commodity traders generally select and use a trading platform that is comfortable, understandable and offers the services they need for their specific trading and investment activities.