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Many small investors have lost their lifetime saving in the stock market crash of 2008. The first choice for many investors was and is the stock market. After getting their fingers burnt during the recent stock market crash, many small investors are looking for new avenues. Investors have many choices for investing their money today. Have you ever thought of futures trading? But futures trading is not for you if you are among those who take a look at their mutual funds portfolios only once a year. Risk and uncertainty goes hand and hand in money making opportunities.
You will have to get out of the buy and hold investment mentality if you want to take on futures trading. Those who cant shake off the preconceived notions and discover to make money as the market rise and fall are not successful at futures trading. What it means that those who can embrace the inherent volatility of the world and the markets and use it as a wealth building tool are more successful at futures trading. Futures trading didn’t have global significance until the 1980 when companies and governments embraced futures trading as financial management tools for hedging although futures markets began in the United States in around 1850s. Futures trading belongs to the 21st century.
Futures trading is done by most of the people like you and me who are interested in making money in the markets. Trading E-mini futures has become popular with many individual investors apart from professional traders and speculators who also trade other futures contracts. Buy low and sell high, is the basic premise in futures trading as it is in stock trading. You try to go long when the prices are low and go short when the prices are high.
You will like to know what is different in futures trading from stock trading. The fact that you can trade futures with leverage on either long or the short positions introduces an additional element of risk not present in the stock market. Leverage is a risky. Another major difference with stock trading is that there is no uptick rule in futures trading. Thus, it is as easy to sell short as it is to buy long. This means that you can easily enter into a position to capture a downward move in prices with no restriction.
How do you become good at futures trading? How do you manage to survive at futures trading even when you are not particularly good at it? The answer is simple. You should have the money and the ability to develop a trading plan that enables you to keep making money in the market long enough to capitalize your next big move. In nutshell, it means that you wont be able to trade futures if you dont have enough money. And you wont last long in the market if you dont have a good trading plan. The chances are your money will quickly disappear.
You must know this thing that only 5% of the futures traders succeed and 95% of the people trading futures lose money consistently. You need to have at least $25,000 in your account in order to start trading futures. However, $5,000 is the minimum with which you can start trading futures. When you start trading futures make sure that you understand the risks involved and that you go into trading futures contracts with realistic expectations. You can take advantage of the managed futures accounts if you are not sure how to handle the risk involved in futures trading.
In short, you need money, patience, knowledge and technology to be able to trade futures contracts. Trading futures contracts is truly a hybrid that uses both fundamental and technical analysis. You need to know the futures contract specifications. There are seasonal tendencies in the markets that you need to be aware of. The fundamental side of futures trading involves getting to know the industry in which you are making trades. You should also know the important reports that usually affect the industry in which you are planning to trade futures contracts. You need to keep an eye on the release of those reports.
The technical side of futures trading tells you what the market will do in response to the fundamentals. You will need to develop your own trading style whether it is momentum trading, scalping or swing trading. Once you know your trading goals, establish a trading plan for getting there. Dont try to conquer every type of analysis at once. Instead, focus on mastering one item at a time”maybe concentrating only on chart patterns such as bull and bear flags, for instance. Today individuals trading futures are on a level playing filed with professional traders and institutional investors. Technological advances especially the internet has transformed the futures trading landscape.
E-mini products have been created specifically to appeal to the individual investors and are now standard among exchange offerings. Now most futures contracts are electronically traded with online order entry and execution. Futures contracts are highly leveraged and marked to the market daily. Leverage is beautiful when it works in your favor. However, it is dangerous and has a dark side. You will only come to know about it when you are caught on the wrong side of the market with highly leveraged positions. There are many ways that individuals can use futures for trading and portfolio diversification. Futures industry is well regulated and has superior financial safeguards in place to ensure trading integrity.
Good services and basic materials will probably undergo major price swings, up and down during the next two to three decades. The volatility of the markets is only going to increase. The chances for sustainable trend that last for decades like that happened in the stock markets during the 1980s and 1990s are less likely.
The past investors could afford the luxury of buying and holding stocks and mutual funds for the long term (this is what Warren Buffet did in building his fortune). The todays world calls for a more active and even speculative investor. The new world calls for a trader and futures trading offer one of the best opportunities to make money by trading in volatile times. However, to change from a couch potato to a futures trader, you will have to work at it or you will be out of the game very quickly. Trading future contracts is a risky business and requires active participation. You need to know the futures market intimately. A winning futures trading plan can help you achieve success!
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