Whenever you are considering future trading, the experts and the experienced trader will suggest that the trading future is available with more risks. But there is no lack of examples available to prove the risks of trading futures.
If the trading futures are available with risks, then why are people doing it? This is a common question that occurs in people’s minds. If you are searching for the answer to this question, then you are on the right page.
In this article, you will get to know about the risks of trading futures and how to manage the risk of trading futures. So stay on this page and read the manuscript.
Able to lose money
Even though there are so many cons of trading futures available, the people think that they are able to lose money when they are involved in the trading futures.
Unlike the trading stocks or any other assets, the traders can lose their capital amount whenever they are exposed to future trading.
Unlimited liability
The next risk in futures trading is it will expose to unlimited liability. The unlimited liability is defined as the loss that can accumulate beyond the capital or even in the amount of cash that is available in the trading future.
This loss will occur as long as the price of the asset is moving against the future position. In the trading future, you have to maintain the small capital amount equal to the predetermined fraction of value called the initial margin.
Leverage will cause risk in future trading
Compounding the problem that has occurred in the unlimited liability helps to emerge the leverage problem. It mainly depends on the ratio between the initial margin and the futures trading.
Leverage is a great one when the prices are moving according to your favor. But it will be a risky one when it is moving contradicts your expectations.
Daily settlement
The daily settlement is nothing but the profit and losses that are settled daily at the end of every trading day. The only way to overcome the daily settlement risk is by having enough cash at the back of each future position, whenever there is a temporary change in the price of assets.
Final thoughts
The above-mentioned are the risks that are available in future trading. Make use of this article, if you need any clarifications regarding the risks of future trading.
