Home >> Business >> What are the risks associated with investing in futures?

What are the risks associated with investing in futures?


Stocks, funds, and futures are all mainstream products in the financial markets today. From a risk perspective, futures have the highest overall trading risk, what are the risks of futures trading?

The risk in the futures market arises from the uncertainty of the future. Due to the characteristics of futures trading, risk factors are magnified and investors face higher risks in futures trading than in spot trading or trading other financial products.

First, the risk of price fluctuations. Simply put, the average retail trader trading futures makes a price difference, and only price fluctuations can generate profit or loss, which is the risk of price fluctuations.


Second, trading risk, which is also the biggest risk for ordinary investors, arises from the futures trading process, including the risk arising from poor market liquidity and the difficulty of trading quickly, timely and conveniently, as well as the risk that investors may be forced to close their positions when futures prices are volatile and the margin cannot be made up within the specified time.

Third, own risk, as each investor's knowledge level, trading experience and operation level are different, and these can bring different degrees of risk, such as poor price forecasting ability, subjective and random guessing, resulting in losses when the price trend is contrary to the judgment; such as the habit of operating with a full position, once encountering a slightly large price fluctuation, it will lead to the loss of most of the capital, or even overdraft or through position, etc.


Fourth, the risk of commission, which comes from the futures company. Different futures companies differ in size, creditworthiness, and business status, which may bring risks such as inconvenience in business, so it is very important to choose a reliable futures company.

Fifth, the risk of delivery. After the contract expires, all open positions must be delivered, so investors who are not prepared to make delivery should close out their open positions in time before the futures contract expires or before the delivery month arrives to avoid liability for delivery. In commodity futures, individual investors cannot participate in delivery and must close their positions in a timely manner in accordance with the trading rules, otherwise they will be forced to close.