What are derivatives?? In this article, HVA will help you better understand the concept and advantages and disadvantages of investing in commodity derivatives market.
What are derivatives?
Goods What is derivative?? Commodity derivatives are a form of financial investment based on the future value of a specific asset, such as oil, gold, or corn. Instead of directly buying or selling the actual asset, investors enter into derivative contracts, which are agreements to buy or sell the asset at a specified time in the future at a pre-agreed price.
Trading commodity derivatives provides investors with the opportunity to profit from price movements without having to own the physical asset. Common types of derivative contracts include futures, forwards, and options.
What are the advantages of trading commodity derivatives?
Legal Guarantee
The commodity derivatives channel is licensed by the Ministry of Industry and Trade of Vietnam, providing safety and transparency in transactions. This is an effective tool to diversify investment portfolios. Especially, in the context of the "frozen" real estate market and the potentially risky stock market, commodity derivatives emerge as a great choice.
Excellent liquidity
Commodity derivatives is a highly liquid investment channel, attracting the participation of many investors worldwide with large trading volume. This market offers flexible trading opportunities, suitable for both short-term and long-term investors.
Transparent and secure
When connected to international exchanges, all commodity derivative products have transparent information, standardized according to international regulations and through the Vietnam Commodity Exchange, ensuring legal safety. At the same time, trading products comply with the global supply-demand principle, helping to minimize the risk of price manipulation. Therefore, investors can be completely assured and not worry about investing. derivatives scam.
Big Leverage
The commodity derivatives market allows investors to use financial leverage from 1:10 to 1:20, which helps optimize profits compared to the stock market. At the same time, the risk level is significantly lower than the foreign exchange market (Forex).
Low initial capital
In particular, unlike other forms of financial investment, commodity derivatives allow investors to make profits whether the market is rising or falling through buying and selling transactions. You can start investing with a small amount of capital, from only 10 million VND.
What are the opportunities and challenges from the commodity derivatives market?
Derivatives market opens up great opportunities for investors looking to profit from the volatility of commodity prices. However, along with opportunities come challenges that you need to be aware of when participating. Below is important information about the benefits and challenges of this market.
Opportunities
- Profit from price fluctuations: Derivatives market has a high level of volatility, providing attractive opportunities for investors when predicting price trends correctly.
- Contract Diversity: With a wide range of derivative contracts on different commodities such as oil, gold or corn, this market caters well to the diverse needs of investors.
- High liquidity: The high liquidity feature of the commodity derivatives market allows investors to buy and sell contracts quickly and flexibly.
Challenge
- Risk from price volatility: While price volatility offers great opportunities, it also comes with high risks, especially for investors using high leverage.
- Impact from external factors: Derivatives market are susceptible to factors such as global economic conditions, weather changes and government policies, making prices volatile and difficult to predict.
- Systemic Risk: Technical problems or system errors can occur unexpectedly, disrupting trading and affecting investor profits.
Understanding both the opportunities and challenges of the commodity derivatives market is critical to making informed investment decisions and achieving your financial goals.
Instructions for steps to participate in derivatives trading
Getting involved in commodity derivatives trading can be challenging, but if you follow the basic steps below, you will be able to approach the markets confidently and effectively.
Master the basics
Before you start trading, learn about What is commodity derivatives?, how the market works and the factors that affect prices. This will help you better understand the risks and opportunities that the market can bring.
Choose a reputable exchange
Choosing a reputable and licensed derivatives exchange is an important step. Make sure that the exchange you choose provides all the necessary tools and services to help you trade conveniently and safely.
Open trading account
Once you have chosen the right exchange, the next step is to open a trading account and choose commodity derivatives trading timeThis process may require you to provide basic personal and financial information, along with some verification procedures.
Deposit money into account
Once you have opened an account, you will need to deposit funds to start trading. Exchanges usually offer a variety of payment methods, such as bank transfers, credit cards, or e-wallets, for you to choose from.
Choose a derivative and determine a trading strategy
Before you start trading, choose the commodity you want to trade and determine a suitable trading strategy. You can apply technical analysis or fundamental analysis to make informed decisions.
Derivatives trading and risk management
Once you are ready, you can start trading according to your defined strategy. Don't forget to manage your risk by using stop-loss orders and avoid using too much leverage. Following these basic steps will help you get started. commodity derivatives market confidently and effectively. Always update your knowledge and follow the market to achieve the best results in trading.
Should you invest in commodity derivatives?
Derivatives trading is licensed by the Ministry of Industry and Trade and is managed by MXV. This is a safe and effective investment channel, with price information being public, transparent and transactions protected by law. Investors can be completely assured of the transparency of transactions, with price fluctuations of the commodity market being continuously updated.
Derivatives are especially suitable for short-term investors who want to make a profit from surfing. Due to direct links to international exchanges, this market has high liquidity. Compared to some traditional investment channels such as real estate or stocks, commodity derivatives have superior margin ratios, which can be up to 1:30, depending on the type of commodity. The above article by HVA provided detailed and complete information about the concept. What are derivatives?, hope to help investors better understand this form of investment.
