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How to be successful at futures trading?

Today, the functioning of the foreign exchange market is no longer a secret for corporate treasurers.聽However, some do not yet master all the subtleties of this universe.聽Therefore, they decide not to take action.聽Thus, they are depriving themselves of the many business opportunities offered by futures contracts.聽For those in the know, fear of losing your investments is a common problem.聽Fortunately, there are a few tips to limit the risks and take full advantage of future trading.聽This is what we share with you in this article.


Take stock of the situation of your company

If companies are increasingly using futures contracts, it is because they allow them to protect themselves against currency risk.聽Still, hesitating? You only have to do some investigation to find out if your business can also reap the benefits of future trading.聽In general, the proportion of聽turnover achieved internationally gives the first indication.聽The more you do business with foreign currencies, the more you will be exposed to currency risk.

When you聽trade futures聽on the right platform, you greatly limit the currency risk.聽It should be noted, however, that聽your company’s聽margin level聽can influence the management of this risk.聽For example, if you market products with a low margin, you may be forced to sell them at a loss when the exchange rate drops.聽Conversely, you might resist market fluctuations if you have larger margins.

Identify the right time to buy futures

Depending on market exchange rates and your business situation, the strategy to use to protect against currency risk may vary.聽Depending on the case, you can intervene in the聽futures market聽or the聽spot market.聽It should be noted that simultaneous intervention in both markets is possible in certain cases.

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For example, if your company needs to make an international payment in 3 months.聽It is very likely that a market fluctuation will occur at the time of the transaction.聽In order to avoid this problem, you need to insure yourself against聽currency risk聽now.聽To achieve this, buying futures contracts is an effective solution.聽In addition to freeing up your cash flow, this choice allows you to secure the transaction you will be doing in 3 months now.

By their operation, forward contracts allow a company to adjust its聽currency risk hedging strategy聽taking into account its operational schedule.聽Depending on the terms of the contract, you can extend the deadline or request that it be lifted in the event of unforeseen circumstances or poor planning.聽By buying a futures contract for your next international transactions, you lock in the exchange rate at which your foreign currencies will be converted.聽Thus, you improve the management of exchange rate risks.聽It is said, moreover, that the forward contract functions as insurance to protect users against an unfavorable evolution of the exchange rate.

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