Beginner's Guide to Futures Investment

        In the financial market, 'futures' is an important investment tool, although most people have heard of it, they do not know how to operate it. This issue of 'Finance Column' introduces the basic concepts of futures trading in a simple and understandable way, taking you step by step into the world of futures.

        What is futures?

                Futures are essentially a type of 'agreement', representing a contract between buyers and sellers to engage in trading at a future point in time. For example, if today is January and the farmer expects to harvest 100 kilograms of rice in June, and the food processing plant needs to buy rice in June, both parties can agree in advance through futures contracts to trade at a price of NTD 30 per kilogram in June. This way, the farmer can ensure a fixed selling price during the harvest, and the processing plant can lock in procurement costs.

        Characteristics of Futures Trading

        1. Leverage effect: The most prominent feature of futures trading is the leverage effect, where investors only need to pay 10-15% margin to engage in full trading. In other words, investors can participate in larger transactions with less capital, and as a result, profits and losses will be magnified.

        2. Risk aversion function: Futures were originally designed to avoid the risk of price fluctuations. Enterprises can lock in future trading prices through futures trading, reducing the impact of fluctuations in raw material or commodity prices.

        3. Two way trading: Unlike stock trading, futures can be "short". When the expected price falls, investors can sell first and buy later, allowing them to maintain a profit opportunity even when the market falls.

        Main types of futures commodities

        1. Stock index futures: The most common is Taiwan stock futures, whose price trend is linked to the Taiwan Weighted Stock Index, and it is also the most commonly traded futures commodity by Taiwanese investors.

        2. Commodity futures: Futures contracts for physical commodities such as gold, crude oil, and agricultural products.

        3. Exchange rate futures: Futures products related to the foreign exchange market that can be used to mitigate exchange rate risks.

        Risk Reminder for Futures Trading

        Although futures provide flexible investment opportunities, they also come with higher risks, which can be mainly divided into the following three parts:

        1. Leverage risk: Due to the leverage effect, losses may exceed the original investment amount. It is recommended that novice investors start with small trades and gradually increase after familiarizing themselves with the market.

        2. Margin recovery: When the loss reaches a certain level, the futures commission will require the recovery of margin. If the margin is not paid in a timely manner, the holding position may be forcibly liquidated.

        3. Market risk: Futures prices fluctuate greatly, and investors must have good risk management abilities.

        How to start futures trading?

        To invest in futures trading, you need to prepare the following four points first:

        1. Open a futures account

        2. Understand trading rules and risks

        3. Develop trading strategies

        4. Manage funds effectively

        Embark on your futures investment journey through Oriental Securities Corporation

        As a professional securities firm under Far Eastern Group, Oriental Securities Corporation provides complete futures trading services. The advantages include:

        1. Professional service team: Provide professional futures trading consultation and advice to assist investors in grasping market trends.

        2. Discounted trading conditions: Provide a special discounted handling fee plan.

        3. Convenient trading platform: Provides computer and mobile trading platforms, making it easy for investors to keep track of market trends at any time.

        4. Complete educational resources: Regularly hold futures investment lectures and educational training to assist investors in enhancing their investment knowledge.

        conclusion

        Although futures trading carries high risks, as long as one has the correct knowledge and a cautious attitude, it is still a worthwhile choice to be included in an investment portfolio. Through the professional services of Oriental Securities Corporation, you can embark on your futures investment journey with peace of mind. Whether you want to avoid risks or pursue investment returns, Oriental Securities Corporation can provide you with the most suitable solution.

        If you are interested in futures trading, please feel free to visit the various branches of Oriental Securities Corporation for consultation. Our professional team will provide you with detailed explanations and suggestions.

        *Image source: freepik

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