There are two main categories of players within the futures market platform and they are commonly referred to as hedgers and speculators. Each has differing contributions and styles to the futures trading platform, but both are equally effective at their individual chosen exercise.
Examine It Well
The hedgers are usually entities such as farmers, manufactures, importers and exporters where the buying and selling process in the futures market is basically to secure the future price of the intended commodity. This is then to be sold at a later date in the cash market. This is where the profits are made while still ensuring the protection against price ricks. Thus the hedgers are the facilitators that provide a means to lock in as acceptable price margin between the cost of the raw material and the eventual retails cost the final product procures.
Speculators on the other hand do not focus too much on the aim to minimize the risk for the futures trading, but rather they focus on the benefits that may arise from the risky nature of the futures market. The speculators main aim is to profit from the price change that the hedgers are busy protecting themselves against. Speculators capitalize on the anticipations of high risks and therefore expect to maximize on the profits. Speculators do not seek to actually own the commodity featured in the transaction but will enter the market simply to seek profits by offsetting the resign and declining prices through the buying and selling of contracts. There are a few ways to venture into the futures trading market but it should be notes that all involve some level of risks. It can be done simply by trading on one’s own account or opting to have an account managed by professionals either as individual entities or
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as companies. There is also the possibility of joining a commodity pool where working together with others may be beneficial in terms of garnering relevant information.