In the beginning, we must clarify what is meant byindices and futures contracts. Futures contracts are one of the various types of trading that allows investors to maximize benefits from falling markets and even rising ones.
When a trader trades with futures contracts on a specific indicator, that means that he is searching for the overall performance of the markets, and is not just focusing on certain shares of the capital stock. The trader should take a comprehensive look at the market, which would allow him to be able to achieve profits, regardless of whether the prices were rising or falling. This depends on the method that the trader is basing his trades upon.
We can consider futures contract trading a relatively simple concept, in which the trader places a share on every point of the indicator’s motion he is trading on. Also, the internet futures contract service that the 12 Trader company provides, contributes to the ease of reaching all markets across the world.
When a trader trades futures contracts in the British FTSE stock, this means that the trader is dealing with British companies, or companies that are based in Britain.
Trade heavily relies on indices all over the world. This is due the fact that the number of companies that form the indices is huge, and it is normal for a single trader to be unable to affect the overall performance of the indicator, as it is merely a factor in it.
What affects the indicator’s performance, is the national economy that the indicator follows. This is to be expected, because when certain economies flourish, this is due to the growth and development of the companies that are present in that country. Therefore, the economy is growing, and this is what makes investors care about the foundations of their markets.
With the financial leverage that we provide, which is an important helping factor, we guide you to the financial leverage that suits your capital, and makes you capable of opening a trade that generates a great deal of profit. With the help of the financial leverage, you will be able to make profits or losses a lot larger than the first share that you have used during your trade in futures contracts. There will be a great possibility of achieving a large profit due to the desirable factors. However, you must learn that the accumulation of your losses is possible, in the event that market has moved against your direction.
You perform a trade and expect an increase, for example, in the monetary UK 100 indicator. Let’s assume that the price is between 5,331 and 5,330, and you are convinced that there is an increase, then you should offer a request to purchase 5 futures contracts at 5,331. This makes you gain 5 sterling pounds on each point. This will be in accordance with one of two scenarios:
In the event in which your expectation was correct, and the indicator reaches 5351 for example, you have closed your trade at this price or level, then bought from the 5331 level,with a selling price of 5350. The indicator, therefore, rose 19 points and, giving you 95 sterling pounds. Based on a simple calculation of 19 multiplied by 5 futures contracts, the result is 95 sterling pounds, and this is your profit from this trade.
Everything that we have covered in the first scenario, also applies to the second one, but the difference being that your expectations turned out to be incorrect. Assuming that the indicator reached 5,310, this suggests that the indicator fell 21 points, and in the same calculation that we used in first scenario, the result would be a loss of 105 sterling pounds.
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