Is it risky to invest in futures?
Investing in futures is risky, and the risk of futures market comes from the uncertainty of the future. Because of the characteristics of futures trading, the risk factors are magnified, and investors face higher risks in futures trading than other financial products.
Investing in futures has the following risks:
1 Market risk: Futures trading may face greater gains or losses due to unpredictable market price fluctuations. Especially in the event of unexpected events or black swan events, the market price may fluctuate violently or there may be gaps, resulting in the inability of the position holder to close the position or stop the loss in time.
2 Leverage risk: Because futures trading has leverage effect, on the one hand, it can amplify gains, on the other hand, it can also amplify losses. If the holder overuses leverage or exceeds his ability, he may face the risk of explosion or bankruptcy.
3 delivery risk: after the contract expires, all open contracts must be delivered. Therefore, investors who are not prepared for delivery should close their positions in time before the futures contract expires or the delivery month comes, so as not to bear the delivery responsibility. In commodity futures, individual investors cannot participate in delivery, and must close their positions in time according to trading rules, otherwise they will be forced to close their positions.
Liquidity risk: Because futures trading needs to be delivered or closed at a specific time and place, if there are not enough buyers and sellers in the market, it may make it difficult to close the trading position or the trading price deviates from the market price, thus affecting the gains or losses of the holders.
5 Operational risk: As futures trading needs to comply with the rules and regulations of the exchange, if the holder is unfamiliar with or does not comply with these rules and regulations, he may face the risk of being fined or prohibited from trading. In addition, if there are human errors or technical failures in the transaction process, it may also affect the transaction results.
Futures is an expectation of future value, so it is difficult to control the rise and fall in the trading process. Investors need to manage risks well. In the process of investment, they must always pay attention to market risks and their own risks, and take corresponding protective measures to avoid heavy losses.