Chapter 20: Understanding (and managing) the Risks of Futures Trading

Anyone buying or selling futures contracts should clearly understand that any given trans-action may result in a loss. The loss may ex-ceed not only the amount of the initial margin but also the entire amount deposited in the account or more. Moreover, while there are a number of steps that can be taken in an effort to limit the size of possible losses, there can be no guarantees these steps will prove effective. Well-informed futures traders should be familiar with available risk management possibilities.

Reprinted with permission from National Futures Association. Copyright 2002.