IDIOT'S GUIDE TO FED2

FUTURES CONTRACTS

BECOMING AN EXPERT TRADER

As a Trader you will need to demonstrate a certain competency at handling futures contracts in order to promote. Your success is indicated by your Trading Rating, which shows on your score. Points are awarded (or taken away) depending on how well a futures contract does, as follows:

Note that this doesn't automatically mean "margin call - bad". It would be acceptable to take a margin call if you believe that by the end of trading, the future will improve enough that you will still make a profit. The trading points are given more or less in line with whether the contract makes a profit overall, by the time it is liquidated.

Clearly in order to be a successful futures trader, you need to be able to predict the movement of prices on the exchanges. This requires that you understand how exchanges calculate their prices, and what factors can make the prices change.

Each commodity has a base price, which is its absolute unchanging price. Each exchange takes the base price for a commodity, and looks at three factors: the stockpile, the consumption, and the production. That is: how much of the commodity is there in storage? How much does the planet's population require to sustain it? How much do the planet's workthings churn out? Using those three things, it sets a price for the commodity, called the exchange price.

It then uses the exchange price to calculate the actual buying and selling prices - the prices you will see on the exchange display. The difference between the two prices is called the spread, and for all Sol planets the spread is set at 20%. That means, the exchange will buy goods for 10% below the exchange price, and sell them for 10% above. Exchanges need to make profits too!

There are two things that make prices change: exchange events, and Merchants. Exchange events are natural or man-made happenings that can change the stockpile, consumption or production figures for a commodity (increasing or decreasing it). Merchants can't do anything to the production or consumption, but they can change the stockpile - obviously, buying goods makes the stockpile go down, and selling goods makes it go up.

Remember that only half of the goods sold to an exchange show up in the stockpile - the other half goes to service the needs of the planet.

There is one more piece of information you need to know, and that is that different commodities behave in different ways when one of the indicators changes. The prices of some commodities increase or decrease in small, steady increments whenever the stockpile changes; other commodities will experience drastic changes in the price, as a small stockpile change results in a massive increase or decrease in the exchange price. Observation of the exchanges over time will show you which commodities react which way. You will be helped by the fact that you can check buying and selling prices remotely for those items in which you hold futures contracts, using the command 'CHECK PRICE commodity planetname'.

Armed with this knowledge of how exchange prices change over time, you can start to predict which futures contracts will be profitable. As the small print on all investment contracts reads, "The value of your investment may go down as well as up," but you shouldn't need a crystal ball in order to avoid those where you will lose groats!


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