Technological advances have rendered the open outcry trading pits of decades obsolete since the turn of the century. In today’s market, practically all transactions are done digitally. There are numerous newfound advantages to futures trading in the digital age; the top five, in no particular order, are listed below.
Improved accessibility
Millions of potential futures traders have gained access to markets via remote, real-time access. Geographic location is no longer an issue, and lower capital requirements have enabled interested parties to take control of their investment lives.
Geographic location is no longer an issue, and lower capital requirements have enabled investors to take control of their investment lives. To experience the benefits of futures trading, you no longer need a six-figure brokerage account or a seat at the market. All that is required to trade is a computer, an internet connection, and a small amount of risk capital.
All that is required to trade is computational power, an internet connection, and a little risk capital reserve.
More opportunities
The current futures market provides a plethora of opportunities to participants. Traders faced a limited range of items before implementing an electronic framework. Despite the availability of traditional commodity-oriented contracts, the diversity was restricted.
In comparison, today’s futures markets provide a diverse range of products that may be tailored to practically any strategy or individual. E-minis, E-micros, and Micro E-minis offer traders an unrivaled range of possibilities. Furthermore, most futures markets are open for trading nearly 24 hours a day, five days a week.
Volatility
Increased pricing volatility may be the most significant impact of the digital era on market behavior. Trading tactics of all varieties may now be executed in the blink of an eye, thanks to ultra-low-latency technologies. Increased involvement has energized the trading of various asset sectors, from commodities to shares.
Although volatility is frequently regarded as a terrible word, it is a key driver of profitability and a significant benefit of trading in current futures markets. The fluctuation of asset values away from equilibrium creates profit opportunities; without dynamic markets, the financial rewards of trading futures are restricted.
Increased liquidity
Consistent liquidity is one aspect of modern futures that new traders may take for granted. A high market depth fosters efficiency through tight bid/ask spreads and reduced slippage. When markets are crowded, they are easy to enter and exit; when they are crowded, erratic price movement, increased slippage, and wide bid/ask spreads become the norm.
In previous years, the electronic marketplace has increased participation and liquidity tremendously. It is now feasible to consistently buy/sell a contract at or near a desirable level. This is one of the primary advantages of trading futures since it has improved the efficiency of the price discovery process.
Cost-effectiveness
Previously in the open outcry system, it was expensive to conduct business. Commissions, exchange fees, service fees, and account minimums were overpriced. Participation in the market was frequently restricted to high-net-worth investors.
Final thoughts
Futures trading and the future market is a very liquid market that provides a wonderful framework for risk management and the capability of leverage trading to maximize profits. It is a gamble on the direction of the stock’s movement, with the buyer profiting from an increase in price and the seller profiting from a price decline.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
