The formation process of futures price is a process of continuously collecting information, inputting information and generating price, and the quality of information determines the authenticity of futures price. Because most participants in futures trading are familiar with a commodity market, they have rich business knowledge, extensive information channels and a set of scientific analysis and prediction methods. They bring their own information, experience and methods to the market, judge, analyze and predict the supply-demand relationship and price trend of commodities in combination with their own production costs and expected profits, and report their ideal prices to compete with many competitors. The futures price formed in this way actually reflects the prediction of most people, which is authoritative and can truly reflect the changing trend of supply and demand.
Openness of price report
The price reporting system of the futures exchange stipulates that the price of each new transaction reached by the exchange should be reported to the members and their floor brokers in time and made public. Through developed media, traders can know the trading situation and price changes in the futures market in time, judge the price trend in time and further adjust their trading behavior. This constant adjustment of price expectation is finally reflected in futures prices, which further improves the authenticity of futures prices.
Futures price expectation
Futures contract is a kind of price signal that constantly reflects the relationship between supply and demand and its changing trend. Futures contracts change hands frequently, so that the emerging prices can constantly reflect the supply and demand situation and changes in the market.
Futures trading is highly transparent.
The futures market follows the principles of openness, fairness and justice, and trading orders are matched and traded in highly organized futures exchanges. All futures contracts must be traded by public bidding on the futures exchange, and OTC trading is not allowed. The free quotation and open competition of the exchange avoid the fraud and monopoly that are easy to occur in one-to-one spot trading.
Centralized supply and demand, strong market liquidity
There are many participants in futures trading, such as commodity producers, sellers, processors, importers and exporters and a large number of speculators. These hedgers and speculators gather together to compete through brokers, and the market liquidity of futures contracts is greatly enhanced, which overcomes the limitation of insufficient liquidity in the spot trading market and helps to form prices.