What is a Futures Market?
What is a Futures Market?
The futures market is one in which contracts in which the parties undertake to buy or sell in the future a certain good (agricultural product, mineral, financial asset or currency), defining in this quantity, price traded, and expiration date of the transaction.
Futures are highly liquid financial instruments traded, which means you can operate with very tight spreads. Transaction costs are low and prices are transparent due to the level of specificity found in futures contracts and the regulations imposed by the various markets.
What are Futures?
The basic objective of a futures market is to provide an efficient mechanism to protect persons or companies exposed to adverse price fluctuations in its most important assets. In simple terms, the futures markets enable the transfer of risk, which in its absence should bear the economic operators themselves.
What Futures Markets in the world?
Futures contracts can subscribe on agricultural products (wheat, coffee, soybeans), minerals (gold, silver, oil), financial assets (stock price indices, fixed income instruments, interest rate.
What role does the stock market have?
The Stock Exchange is the physical place where negotiations are conducted, also facilitating the means for them to be conducted efficiently.
The Exchange also performs regulation and market control, delivery to this and investors the most comprehensive and timely information for decision-making.
Defining Derivatives Market
A derivatives market is where investors trade in derivatives to hedge the risks of the underlying asset they own.
The incredible expansion of derivatives and their use has been the dominant feature of financial markets over the past 20 years. As the main goal of any investor is to maximize their returns, investors needed an instrument or instruments that allow them to minimize their risk profile. The first derivative contract was a futures contract 1650 which consisted of a standardized contract rice.
What you should know about the derivatives market
Derivatives have no value in themselves, but their value is derived from another asset that could be a currency, interest rate, a commodity, a value of stock or bond. For example, a derivative of IBM stock value based on the stock price. Similarly, a derivative contract depends on the price of wheat wheat.
Basically, a derivative is an agreement or a specialized contract that gives the buyer of the derivative option to buy or sell the underlying asset at a specific date or within a specified time in the future at an agreed price. Derivative contracts have fixed expiration dates ranging from 3-12 months after the start of the contract. The current value of the derivative contract depends on the price of the asset is based and the length of the period of validity.
What is Technical Analysis?
Technical analysis is a technique used to predict the future direction of prices through the study of historical market data, primarily the prices, volumes and open interest.
Technical traders use data operations (such as previous prices and trading volumes) along with mathematical indicators to make their decisions when trading. This information is usually displayed in a graph is updated in real time and is interpreted as to determine when to buy or sell a specific instrument.
What is Fundamental Analysis?
Fundamental analysis is a method that tries to predict the intrinsic value of an investment. Is based on the theory that the market price of a good tends to move towards its “real value” or “intrinsic value”.