Futures trading are one of these types and also are used for trading goods and services. This type is related to trading done in future condition as can be understood from the name. This type of trading involves a pre determined agreement between the buyers and sellers of the commodities before some days of the actual selling of the products This agreement is made in order to earn profit from the contract from the view of both the seller and buyer.
The price that prevails on the actual date of sale and purchase of commodity helps in increasing the earrings’ for the buyer and the seller dealing in futures trading. Seller will be on the better side if the market value of the commodity falls as on the date of transaction. This is because the buyer had accepted the high price at earlier day when market prices were high as compared to current price. Where as the situation can also get reversed as in the prices get high as on the date of actual transaction of the commodity.
Thus it can be observed that there is no bargaining for the prices to reduce of increase it whereas both the parties are accepting what they had promised at past date. These changes are totally due to the market conditions alone. The situation of the market whatever it is, have to be accepted by both the parties as they have mutually agreed before for the contract Thus futures trading depends on fate of both the parties as to how will the prices change and the same will be affected on the contract.
The parties must correctly speculate the future prices of the commodities that they intend to buy in order to be on the profitable side. Also the person must be ready to suffer the losses that may arise due to contingencies by keeping reserve margins in their hands. The futures trading are now popular in almost all the sector but the concept is widely used in stock purchases and for FMCG goods
In remote areas, the farmers are given benefits of trade futures as they will get the same price even if the price falls in the future However, the trading has to be carried with great care and analyzing by the people especially if they are beginners as there are lots of risks involved in this type of trading