Futures trading allows traders to buy and sell contracts for assets at a predetermined price on a future date. This trading occurs on exchanges and includes commodities like oil and gold, as well as financial instruments such as stock indices and currencies.

Traders often use leverage, which enables them to control larger positions with a smaller deposit, amplifying potential profits but also increasing risk. Understanding this balance is crucial for success.

Contracts must be settled at expiration through either physical delivery of the asset or cash settlement, where the difference between the contract price and market price is exchanged.

Futures markets are highly liquid, facilitating quick trades but also leading to rapid price changes. This volatility presents both opportunities and risks, making effective risk management essential.

In summary, futures trading offers powerful ways to manage risk and capitalize on price movements, but it comes with inherent risks that require traders to remain informed and prepared.