What is Future Contract?

Future Contract is a standardized contract that traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.

The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. A futures contract gives the holder the obligation to buy or sell. Both parties of a "futures contract" must fulfill the contract on the settlement date.

Example: If you're a baker and you need to have wheat to bake your special walnut wheat sourdough bread next summer, and you're not sure that there's going to be enough wheat to sold in the market at that time so you can buy a futures contract to guarantee that you'll have the amount of wheat you wanted with a preset price.

Who trades futures?

Hedgers
Who have an interest in the underlying commodity and are seeking to hedge out the risk of price changes such as when the fluctuation of gold price, you may want it to set a price which you and the gold producer agreed upon.

Speculators
Who seek to make a profit by predicting market moves and buying a commodity "on paper" for which they have no practical to produce it becoming a finish products and they sell the contract to other producers when the prices of the contract has rises.

Role of Stock Exchange

There are a lot of Stock Exchange worldwide that its main activities are provides "trading" facilities for stock brokers and traders, to trade stocks and other securities.
Example of the Stock Exchange are

New York Stock Exchange

Tokyo Stock Exchange

Bursa Malaysia

NASDAQ Stock Exchange

Samples of The Majors Currecies

There are many currencies in the world and most people focuses on the biggest and most liquid currencies that is called "The Majors"

US Dollar

Japanese Yen

Euro

British Pound

Swiss Franc

Canadian Dollar

Australian Dollar

What is FOREX?

"Forex" stands for foreign exchange; it's also known as FX.
In a forex trade, you buy one currency while simultaneously selling another
(That is, you're exchanging the sold currency for the one you're buying)

Currencies trade in pairs, like the

• Euro-US Dollar (EUR/USD)
• US Dollar-Japanese Yen (USD/JPY)
• & Others

The world's most traded market, trading 24 hours a day with average daily turnover of US$3.2 trillion, forex is the most traded market in the world.

A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.

Why Trade Currencies?

Daily turnover in the world's currencies comes from two sources:

• Foreign trade (5%) - Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency
• Speculation for profit (95%)

For the Latest Rates of currencies pairs, you can check it at
http://www.bloomberg.com/markets/currencies/fxc.html

4 Criteria in Choosing the Right Business for Investment

The business that can be easily understood
You must choose the business that can be understood by you. When it can be understood, you will be able to identify the business activities and its operation in the company such as how they make a sale or where their payment went.

The business has a favorable long term prospects
This shows that the company will be expanding their businesses such as franchising and continue providing new services that more and more customer will be attracted therefore increased their profit in the long run.

The business has a good management team
It means that the top management such as the CEO, CFO and their employees are able to perform their job with integrity and having good corporate governance towards its stakeholder. It also proves that the company has a good internal control which can prevent the company from fraud.

The business has attractive pricing
This shows that the company is able to increase their price of products without losing market share thus proves that they will have a high profit margin.