# If You Would Like The Secret Future System Trading Formula That Only A Handful Of Trader's Know About, Then Here's Your Shortcut Guide To Future Trading Success!

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 The words ‘futures’ and ‘commodities’ are often used together and describe the financial, physical and more exotic instruments which are traded throughout the world. Commodities are items like wheat, corn, gold and silver and Cattle and Pork Bellies and Crude Oil.

At a simplistic level when farmers take their crop to "market", they are selling commodities. To understand how you, a speculator fits into the picture, let's look at a commodity from start to finish. Let’s look at a wheat farmer who planted his crop about three months ago and in two months it will be ready to harvest.

After careful analysis, the farmer calculated that it had cost about \$2.50 a bushel to grow it including overheads. Anything he can sell it for over \$2.50 is profit.

Right now, wheat is selling for \$3.00 a bushel but the price has been going down a little every week for the last few weeks. Since it's going to be three months before the crop is ready for harvest, what can the farmer do? He is concerned that if the price continues to drop over the next three months, the price may be lower than \$2.50 a bushel, which is what it cost to grow it.

So what should he do? Using future system trading, he could sell the future crop at today's price of \$3.00 a bushel by calling a Broker and selling a futures contract at today's price of \$3.00 a bushel to be delivered three months from now.

The risk in doing this is that if the price of wheat goes up to \$3.50 a bushel during the next three months he will still only get \$3.00 a bushel for it because it was pre-sold today for \$3.00 a bushel. But on the other hand, if the price of wheat drops by then, he will have locked in at a price of \$3.00 a bushel. This seems like a good way to go since the price of wheat has been going down, not up, in the last few weeks. This forms the basis of future system trading.

When the Broker gave a price to "sell" a contract, he acted as a middleman to find someone who would "buy" the contract. Now who would want to buy the wheat contract at \$3.00 a bushel?

Of course it's someone who is buying wheat and is concerned that the price of wheat will go up, not down, three months from now and they want to protect themselves in case of a price increase.

### So how do you make money with Future System Trading?

As a speculator you would carefully analyse the charts on wheat and say yes indeed the price has been dropping and it looks like that the price is going to stop dropping and start to go back up again. The speculator thinks that in three months it's going to be \$3.50 a bushel, not \$3.00 a bushel that it's selling for today.

The speculator senses an opportunity to be able to buy a contract at today's price of \$3.00 a bushel and hold it. If he is correct and the price goes up, he makes a profit on the commodities contract. This is basic future system trading.

When he buys the contract at today's price of \$3.00 the person who sold the contract guarantees him that price. They must honour their end of the bargain and sell it to the speculator at \$3.00 a bushel, even it the price goes up.

On the other hand, if the price goes down, the speculator loses money. How would he lose money? Because if the price of wheat three months from now is \$2.50 a bushel, that means he can only sell it for \$2.50 a bushel yet he agreed to buy it for \$3.00 a bushel because he bought a futures contract.

The major difference in making money in stocks vs. commodities is leverage. For example: a contract in wheat is for 5,000 bushels. You don't actually buy or sell 5,000 bushels you just control 5,000 bushels. You would put up a "deposit" with a Broker for the right to do this. In the case of wheat, that "deposit" which is also called your "margin" is only \$650. So, \$650 controls one contract for 5,000 bushels of wheat. Now that's leverage!

Now, all this sound fine and dandy,
but what are the risks of Future System Trading?

Anytime you have the potential to make a profit you also incur the potential of taking a loss. Keep in mind too that the potential loss is also leveraged.