The futures market is probably the least understood of all financial market subsets despite having been around since the mid-nineteenth century. It had its origin from the simple forward contracts recorded by olive merchants and farmers, which date as far back as the sixth century BC in Greece.

Throughout history, other merchants also sold their wares ahead of its arrival by ship, where the price of goods was settled at the time the agreement was struck so that the seller was protected against any price decline between the time of sale and delivery, while the buyer was protected against any increase in price.

Futures are derivatives and its value is derived from some other underlying product. While having its roots in commodities, the majority of transactions on the world's futures exchanges today have many types of financial instruments as their underlying product.

Futures market of today is a highly organized market place that allows participants to make agreements to buy or sell commodities or financial assets at a future date. There are two different methods of trading.

The first is floor trading, known as "open-outcry system" and is similar to an auction based system where buyers and sellers declare openly their intention to buy or sell a specified futures contract with each futures contract having their own section of the floor.

The second is "screen-based trading", currently being used in Malaysia where trading is fully computerized and orders are done through futures broker representatives in their dealing rooms.

Definition of a Futures Contract
The definition of a futures contract is "a legally binding agreement made between two parties to buy or sell a commodity or financial instrument, at an agreed price, on a specified date in the future". The quality and quantity of each contract is standardized and hence the price at which the contract is traded is the only variable and is determined between the buyer and seller at the time when the contracts traded.?

The price at which a futures contract is traded is truly the consensus price. It's formed by a wide range of market participants all with their own expectations of where the price will be. In many ways, a futures contract price is a forecast of where buyers and sellers expect prices to be on a given date, given the information they currently have. As relevant information or market conditions change, so will the futures contract price.