Futures risk education

Risks of futures trading

1、 Brokerage commission risk

That is, the risk generated in the process of clients' selection and futures brokerage companies' establishment of entrustment. When selecting a futures brokerage company, the client should compare and select the scale, credit standing, operating conditions, etc. of the futures brokerage company, and sign the Futures Brokerage Entrustment Contract with the company after establishing the best choice. When preparing to enter the futures market, investors must carefully investigate, carefully make decisions, and select companies with strength and credibility.

2、 Liquidity risk

That is, because of the poor market liquidity, it is difficult for futures trading to conclude transactions quickly, timely and conveniently. This kind of risk is particularly prominent when customers open and close positions. For example, when building a position, it is difficult for the trader to enter the market at the ideal time and price to build a position, and it is difficult to operate as expected, and the hedger cannot establish the best hedging portfolio; When closing positions, it is difficult to use hedging to close positions, especially when futures prices are in a continuous unilateral trend or near delivery, market liquidity decreases, making traders unable to close positions in time and suffer heavy losses. Therefore, to avoid liquidity risk, it is important for customers to pay attention to the market capacity and study the composition of the main force of both sides, so as to avoid entering the unilateral market dominated by unilateral strength.

3、 Risk of forced closing positions

The daily settlement system for futures trading shall be carried out by the futures exchanges and futures brokerage companies at different levels. In the settlement process, because the company will settle the profit and loss of the traders every day according to the settlement results provided by the exchange, when the futures price fluctuates greatly and the margin cannot be supplemented within the specified time, the traders may face the risk of forced closing positions. In addition to the compulsory position closing caused by insufficient margin, when the total position of the brokerage company entrusted by the client exceeds a certain limit, the brokerage company will also be forced to close positions, which will affect the situation of the client's compulsory position closing. Therefore, when trading, customers should always pay attention to their own capital status to prevent the forced closing of positions due to insufficient margin, which will cause heavy losses to themselves.

4、 Delivery risk

All futures contracts have a time limit. When the contract expires, all open positions must be physically delivered. Therefore, customers who do not intend to make delivery should close their open positions in time before the expiration of the contract, so as to avoid taking delivery responsibility. This is a special point of the futures market compared with other investment markets. New investors should pay special attention to this link, and try not to hold the contract in hand until it is close to delivery, so as to avoid being trapped in the dilemma of "position squeeze".

5、 Market risk

The biggest risk of customers in futures trading comes from the fluctuation of market price. This price fluctuation brings the risk of trading profit or loss to customers. Because of the leverage principle, this risk is amplified, and investors should always pay attention to prevent it.