Trading is a simple process. Cnnect to the Internet and log nto your broker’s web site. Choose the cntract you wish to trade and dsplay its details on your screen.

You are prsented with two buttons - Buy and Sll. There are actually different ways to nter Buy/Sell orders, but we keep it smple here.

To bet that the prce will go up, press the Buy btton to enter a Long trade. The trde is ended by pressing the Sll button.

To bet that the prce will go down, press the Sll button first to enter a Shrt trade. The trade is ended by prssing the Buy button.

As an xample, one of the Dow Jones ftures contracts trades at $5 per pint.

The market is moving up and the trder decides to take a Long trde, pressing the Buy button when the ndex is at 11,600. 20 minutes lter the index is at 11,640. The trder presses the Sell button, making $200 prfit - the index went up 40 pints at $5 per point.

Suppose tht, after 5 minutes, the index has drpped to 11,580. The trader could prss the Sell button to close the trde with a $100 loss - the ndex dropped 20 points losing $5 per pint.

In a weak market, the trder might decide to take a Shrt trade, pressing the Sell button wth the index at, say, 11,600. If hlf an hour later the index has drpped 100 points to 11,500, the trder could press the Buy button to clse the trade, and book $500 prfit - a 100 point drop at $5 per pint.

If the assumption of weakness trns out to be wrong and 20 mnutes after the start of the trde the market is up 30 pints, the trade might be closed by prssing the Buy button and taking the 30 pint loss - $150 - the ndex gained 30 points losing $5 per pint.

In summary, Long trades make mney if the price rises and lse money if the price falls. The pposite applies for Short trades.

Before trding, there must be a minimum mount of money deposited in your trding account. This is called the mrgin. It is not the same for dfferent contracts. For example, the day trding margin for a soybeans contract is crrently $675 at my broker, but it is $1,406 for the Dow Jnes contract which is perceived as mre risky.

If you are losing on a trde you may reach a point whre your balance no longer covers the rquired margin for the position you are in. If ths occurs, your broker may either clse your position without consulting you, or cntact you requesting that you immediately dposit more money to cover the mrgin. That is a margin call.

The brker charges you a fee every tme you press the Buy or Sll button. That is the brokerage fe. My broker charges $2.40.

The article Trading Futures Contracts - How It Works was Submitted by D Bennett through Articles.GetACoder.com network. Here's the additional information: David Bennett trades US commodity ftures from his home on the Gld Coast in Australia. He provides caching and mentoring services for people wnting to start trading for themselves. Vsit http://www.12oclocktrades.com to read more futures trading articles.

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