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Futures trading is not a perfect instrument, which means that while it poses a lot of advantages and benefits, it also has some flaws or disadvantages. Hence, it is very essential for traders to check and understand both its pros and cons first in order to have a more holistic and better judgment whether it is indeed profitable or not. It is in this light that this article will address both these aspects. On the one hand, when it comes to the advantages of futures trading, one of the things that this boasts about is its high leverage. This is because this aspect amplifies how big or small a transaction is without even requiring the trader to put a bigger margin deposit to open a trade. In other words, what this means is that the trader is not obliged to solely and personally withdraw a lot of money from his or her pockets in order to open a trade. Also, as an effect of this, a trader is allowed to trade in higher volumes even without the actual capital deposits for covering the trade with the help of the trade. Secondly, another advantage of this kind of trading is the low commission charges. We all know why it is an advantage or benefit. Well, in plain words, instead of giving that money to the broker, then it is more prudent to have it as your earnings or profits instead. Thirdly, trading futures is also a highly liquid market, which means it has a high turnover of trades that take place all throughout the trading sessions. In other words, it is easier to close positions whenever the trader wants to upon his or her discretion. On the other hand, as I have said above, futures trading has its flaws as well. Among these setbacks are the elements of high leverage and time decay. The existence of leverage is not in contrary to the advantages I have mentioned above. As a matter of fact, leverage remains to be among its key advantages. However, it also poses a possible negative impact since it holds a potential to destruct an account as fast as possible if not handled properly. Secondly, the time decay aspect refers to the fact that futures contracts have a definite expiration date. Hence, it only means to say that they are subject to the price decay even if the value of the assets is fixed. Well, the rationale behind this is that the right in purchasing such asset at the price yesterday is less valuable upon reaching its date of expiration. There are even some cases when some contracts expire absolutely worthless. With the foregoing, it is up to whether you will pursue your career in this field.
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