You've probably heard of day trading before in your exploration of information about trading stocks and shares. But do you know what day trading futures is all about?
A futures contract basically refers to the fact that the seller needs to provide the agreed asset to the buyer at some point in the future. With regard to day trading the idea is to buy a futures contract and sell it again before the day is out. Needless to say you need to know your stuff if you are going to get involved in trades like this, because you can come unstuck very quickly if you don't know what you are doing. The time frame involved with trading futures in a single day means there is very little room for error.
One key advantage about day trading futures is that you will finish the trading day with everything wrapped up neatly. Because the trades take place in a single day you will never be left hanging on at the risk of losing money overnight. Instead everything is finished with and you can think about making new trades on futures contracts the following day.
While there are advantages to trading futures like this, there are disadvantages as well. Because time is of the essence you will need to be able to make decisions very quickly and be aware of exactly what is going on in the market. While you can make a lot of money dealing in futures in this way, you can lose a lot as well.
When you buy and sell stocks in a normal sense you will find that you can focus on hanging onto them for as long as you like. For example you can hold them for a week, a month, a year or several years if you wish. But with day trading you have just a single day to make the necessary trades you want to make. And while you can learn very quickly what it is all about, some people have lost a lot of money through the learning process.
You also need to bear in mind the commissions you will incur through getting involved with day trading futures. Someone who trades in this way is likely to make a lot more trades than someone who buys stock and holds onto it for a long time. So you will have more costs involved as a result.
