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Getting Started with Futures

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In futures trading there tend to be standards in the creation of contracts, such that the terms of new contracts are based on commonly-accepted terms. 

 

This makes the whole process easier, since the terms are usually amenable to both contracted parties and the brokers will have an easier time drawing up contracts.

 

These terms are slightly dependent on the exchanges market where you plan to base your contract on, as well as the commodity under contract.  For example, a wheat futures contract has a standard unit size of 5,000 bushels, and the contract months are March, May, July, September, and December. 

 

As such, you can only set up contracts with increments of 5,000 bushels on the months mentioned above. Visit the futures blog to learn more.

 

One of the sets of terms that varies is the grade, or quality rating of the commodities involved.  Not all countries follow the same standards for quality in their commodities.  As such, standardized tests or highly-precise specifications are necessary to ensure the quality of the commodity being traded.

 

Because the common terms of contracts differ per commodity under exchange, we cannot discuss them here.  There is just too much information to cover, and it tends to be quite technical.  Once you have a solid grasp of the basics, then you can read up on the minutiae of futures trading contracts.

Commodity markets are regulated by different bodies across the world. 

 

Generally, a commodity market is governed by some government or semi-government committee overseeing the various aspects of trading in that country. 

 

A short list of such authoritative bodies follows:

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Click any of the above links to visit the respective authority.

Commodity Futures Regulations
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