What is future trading in stock market?

A futures contract requires a buyer to purchase shares, and a seller to sell them, on a specific future date unless the holder's position is closed before the expiration date. rnThese are basically exchange-traded, standardized contracts. The exchange stands guarantee to all transactions and counterparty risk is largely eliminated. The buyers of futures contracts are considered having a long position whereas the sellers are considered to be having a short position. It should be noted that this is similar to any asset market where anybody who buys is long and the one who sells in short. For example, if someone buys a July crude oil futures contract (CL), they are saying they will buy 1,000 barrels of oil from the seller at the price they pay for the futures contract, come to the July expiry. The seller is agreeing to sell the buyer the 1,000 barrels of oil at the agreed upon price. For futures markets, the trade size is the number of contracts that are traded (with the minimum being one contract). The trade size is calculated using the tick value, the maximum account risk and the trade risk (size of the stop loss in ticks). Maximum Account Risk (in dollars) / (Trade Risk (in ticks) x Tick Value) = Position Size. rnThe one who develops a view on the market movements and buys/sells accordingly.rnThe one who wishes to hedge risks of changing market prices of underlying assets. Since the investor is required to pay a small fraction of the value of the total contract as margins, trading in Futures is a leveraged activity since the investor is able to control the total value of the contract with a relatively small amount of margin.rnThus the Leverage enables the traders to make a larger profit (or loss) with a comparatively small amount of capital. Margin is a critical concept for those trading commodity futures and derivatives in all asset classes. Futures margin is a good-faith deposit or an amount of capital one needs to post or deposit to control a futures contract. The margin is a down payment on the full contract value of a futures contract. There are many futures available for trading. Sectors include stock indexes (they derive their value from the price movement of a collection of stocks, like the S&P 500, the Nasdaq 100, the Dow Jones Industrial Average), grains ( i.e. corn, wheat, soybeans), metals, (i.e., gold, silver, copper), energies ( i.e., crude oil, natural gas) and others. Advantages:rn1.Payless commission for trade activities using futures investments compared to other investment choices.rn2.They are financial instruments that provide high liquidity.rn3. Futures Contract lets you reverse your position and allows you to open short or long positions.rn4. They provide high leverage in order to gain maximum gains with limited investments. Disadvantages:rn1. Some investment strategies can lead to high risks due to the leverage provided by future contracts.rn2. It usually follows set standards for defined amounts and terms giving fewer flexibility options in investing.rn3. Only partial hedging is facilitated by Future Contracts.rnThe consequence of low commission charges can be over-trading by traders.