Earlier, producers and manufacturers of various products used to suffer lot of losses due to sudden change in the prices of their products. In order to avoid this kind of scenario, the concept of futures trading was started. Today it has been divided in to two categories, one is consumers and the other one is producers. This involves trading of various commodities. These commodities can be currency, oil, fuel, petrol, wheat, sugar, grains etc. The list is never ending for these commodities. This kind of investment can earn huge profits for a person however like every trade has got some element of risk involved in it, in this kind of trading also there is risk involved. In order t be a successful futures trader one needs to have in depth knowledge of the commodities, he is betting on and should have a fair idea about the market trends. In case of futures trading, the investor either buys or sells the commodity. The best part is that an investor is not actually required to buy or sell the commodity.
If a trader buys a commodity then it means that the speculation made by him is that the prices of this commodity will increase. At the same time, if the trader is selling a commodity it means that the trader is speculating fall in price in future. Risks are involved but due to the profits involved, there are many people who are getting attracted toward futures trading. If you are new investors then it is highly advisable that you start with shadowing a experience trader and learn the basics and tricks of this trades. Slowly and gradually, when you think that you are capable of managing the bets on your own then you can start off individually. There are contracts which are signed in this scenario which are the proofs of the trading. Producers and consumers have technical names as well. Producers are known as hedgers. These producers can be farmers, oil refinery owner, mine owner etc. On the other hand, there is another category of people involved. They are known as speculators. These speculators are basically the people who speculate on the price of the commodities. Speculators are the investors or the traders involved in futures trading.
If we look at the logic of the futures market then it is very simple. If a person feels that prices of a particular commodity will rise in future then he buys it and if he feels the prices of another thing might go down then he will sell it. By keeping the risk in mind, one can play in a very secure manner.