Cons of Futures
Cons of Futures Trading |
Explanation |
---|---|
High Risk and Volatility | Futures trading involves significant risk and can be highly volatile, leading to substantial financial losses. |
Margin Calls | Because futures traders utilise leverage, they may suffer margin calls, which require additional funds to cover possible losses. |
Complexity | Understanding futures agreements, market dynamics, and different strategies can be difficult, necessitating a substantial amount of monetary knowledge and expertise. |
Limited Predictability | Market movements can be unpredictable, making it challenging to accurately forecast price changes and time entry or exit points. |
Counterparty Risk | There’s a risk associated with the counterparty in futures transactions, particularly if the other party fails to meet its contractual obligations. |