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Sunday, March 30, 2008
Trading Gold Futures
Futures are simply a way for the "market to have some stability" For Example: Lets suppose you own a gold mine and today's price per ounce is $1,000. You can sell a "futures contract" that would give the investor a guaranteed price of $1,000 per ounce. Usually a Futures Contract is for a very short period of time 30-120 days.
Going Short: If you believe that gold is going to decline in price than you would buy a contract that guarantees a buyer will pay $1,000 per ounce. If it declines to $900 per ounce than your contract gives you a $100.oo per ounce profit.
Going Long: If you believe prices are going to increase, then you would go long. This means that if you buy a $1,000 per ounce contract, and gold goes up to $1100 per ounce during the contract period, you would pocket the difference ($100.00 per ounce).
Futures have quite a bit of risk if the market goes against your contract. Your broker can do a margin call at any time; sell your contract; and then take the losses from your trading account.
Going Short: If you believe that gold is going to decline in price than you would buy a contract that guarantees a buyer will pay $1,000 per ounce. If it declines to $900 per ounce than your contract gives you a $100.oo per ounce profit.
Going Long: If you believe prices are going to increase, then you would go long. This means that if you buy a $1,000 per ounce contract, and gold goes up to $1100 per ounce during the contract period, you would pocket the difference ($100.00 per ounce).
Futures have quite a bit of risk if the market goes against your contract. Your broker can do a margin call at any time; sell your contract; and then take the losses from your trading account.
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