Contrary to popular belief, futures traders are not fortune tellers gathering in mystic shops searching for eminent financial truths in a crystal ball.  These real-life traders are engaged in buying and selling everyday commodities such as soybeans, corn and wheat based on their knowledge and skills.  The twist is these goods being “bought and sold” have yet to be planted, harvested or moved into the formal marketplace.

In futures treading, a contract for the goods is being sold rather than the actual goods themselves. If the trade takes place after the crop it brought in from the growing fields, it is referred to as a commodities trade.  Futures traders earn their living by making a contract with a farming facility for a specific amount of a crop with a specified grade and designated time for delivery.  If a farmer has a surplus of his group after fulfilling the obligations of a contract with a futures trader, the farmer is free to sell the surplus to anyone. 

Of course a bit of luck is involved with futures trading but certain knowledge is also required to be successful. To effectively work as a futures trader, you need to know something about the crops you deal with, the climate in the area where they are grown and the predictable weather patterns in the locality for the growing season. For example, a wise futures trader would not invest a lot of money in corn crops if a low season is anticipated due to floods in the area. 

Futures trading is risky even when the conditions are at their very best.  Even if you carefully review every favor, fate has a fickle hand in the ultimate outcome that simply cannot be predicted.  Consider a sudden infestation to a crop you just put all your disposable money into.  The farmer will not meet contractual obligations while you lose all your trade capital due to a single unpredictable circumstance. There is always a risk involved with futures trading because the future cannot be predicted in that crystal ball.

The bigger traders and major speculators are the ones best able to deal with futures trading.  Since venture capital is becoming harder to come by these days, a singular loss in the futures trading market can be the end of your career as a trader.  It is difficult to admit, but sometimes it's a better choice to stay out of game altogether than to lose everything you have due to a tragedy, unusual storm or other unanticipated event beyond control.

If you still insist on future trading after reading all the above, keep in mind diversification is often the best way to remain afloat when everyone else is hitting bottom.  Do not invest all your money in one crop such as corn, especially if there is a chance that crop will perform poorly for the season.  Split trades between soybeans, wheat and corn equally or at a percentage that give you a degree of comfortability if one of the crops falters on the open marketplace.