Futures | Ninja Trading

Futures Trading

September 25, 2009 — 7:09 am

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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Futures

Hassam

Dow Futures Never Lose Trade Secret

— 6:29 am

Know the Dow Futures never lose trade secret! Something fantastic happens to the Dow Jones Index that will make you rich. If you learn this one hidden Dow Futures secret which is repeated for years, you will make incredible profits. Forget indicators and futures trading guides, all you need is to know the secret and the exact trading algorithm. Every day Dow Futures begin trading on Chicago Board of Trade (CBOT) at exactly 8:20 AM EST. New York Stock Exchange (NYSE) opens at 9:30 AM EST. This one hour and ten minutes of Dow futures trading before the trading of stocks at NYSE usually provides financial managers, professional traders and financial reporters good idea of the market sentiment for the day. Dow Futures began trading at CBOT in 1997.

The transaction costs in index futures are significantly cheaper than with stocks. And even as cheap as ETFs are as an investment, futures like Dow futures-the e-mini stock index futures are even cheaper. Just multiply the value of the Dow Jones Industrial Average (DJIA) with $10 in order to find the market value of the Dow Futures. Suppose the DJIA is at 7500 points, a single Dow Futures contract will have a value of ($10) (7500) = $75,000. In other words, the value of the Dow Futures contract increases/decreases by $10 for every point increase/decrease in the DJIA.

Futures traders can use this in build leverage of 10 in their benefit by going long or short in anticipation of a major move in DJIA. So if a futures trader believes that the NY stock market is going to rally huge, he can take long position in Dow Futures and make a huge profit in case his optimism turns out to be true.

The CBOT began trading on its electronic platform in April 2002; a mini sized Dow Futures contract valued at $5 times the average. It has grown quickly in popularity, although the mini sized Dow futures contract hasnt matched the popularity of the CME E-min stock index contract like the E-mini S&P 500 Futures contract.

The Dow Index was first published in 1896 comprising 12 smokestack companies. DJIA grew to encompass 30 large industrial companies and became a popular business barometer. DJIA accounts for about 20% of the market value of all US equities. Dow Jones Industrial Average (DJIA) is an index of 30 largest and most liquid blue chip stocks traded on the New York Stock Exchange (NYSE). The average is maintained by the editors of the Wall Street Journal. Unlike the S&P 500, DJIA is a price weighted index.

Movement in the DJIA is sensitive to the news surrounding the 30 companies represented in the index particularly that with the highest prices as Dow is a price weighted index. Today DJIA is the most widely quoted market indicator in newspapers, radio, television and electronic media around the world.

Most countries with a vibrant stock market also have a futures contract on a stock index that represents that economy. Its not surprising that some of the most popular futures contracts are related to equity markets. Stock-index futures are an integral part of the stock markets daily activity. Currently more than 70 stock-index futures contracts are traded on at least 20 exchanges around the world.

For example futures contracts are available on the Dow Jones Industrial Average (DJIA) as well as the broader Standard & Poor (S&P) 500 Index and the technology oriented NASDAQ-100 index known as Dow Futures, S&P 500 Futures and NADAQ-100 Futures and many other indexes in US. There are now many ETFs available also based on most of these indexes.

Similarly Hong Kong has Hang Seng Futures Contract on its famous Hang Seng Stock Index, France has CAC 40 futures contract on its CAC-40 stock index and United Kingdom (UK) has FTSE-100 futures contract on its famous FTSE-100 stock index, and Dow Jones Euro STOXX 50 covers selected stocks in the euro economy. DAX is another important stock index that ives a good measure of the German economy.

As a percentage of the total number of futures contracts traded, stock-index futures are by far the largest category of futures contracts traded. That dominance clearly speaks of the major role that stock-index futures play in risk management for the entire stock market. Stock index futures like the Dow Futures are traded for speculation as well as hedging purposes.

Stock index futures like the Dow futures are a better option than trading individual stocks. There are other advantages of trading stock index futures like the Dow Futures. Some of these advantages are gains in the futures markets are taxed at a lower rate than the stock market capital gains.

Globex is a 24 hour electronic trading system for a wide variety of futures contract. If something happens on the stock market overnight when it is closed and you want to hedge your risk, you can trade Dow Futures on Globex. Many futures brokerages offer lower commission rates as compared to stocks. When you trade stock index futures like the Dow Futures, you are betting on the direction of the contract value, in this case DJIA and not on the individual stocks that make up the index.

When you are trading index futures, you are blocking out a good deal of the noise that is often associated with the daily gyrations in the prices of the individual stocks. In trading stock index futures like the Dow Futures, you focus on the value and the general trend of the 30 blue chip stocks as a group when you trade the Dow Futures. Similarly when you trade S&P 500 futures contract, you are focusing on the 500 stocks included in the S&P 500 index as a group not as individual stocks.

Stock index futures like the Dow Futures are guaranteed to move in response to the economic indicators. You can simply speculate with the futures contract like the Dow Futures just by using technical and fundamental analysis. You can setup positions with both futures and options as you wait for the news to hit the wire.

Any information that moves the stock indexes can be used to make profit by investing in stock index futures. Stock indexes move when economic news of fundamental nature is released. For the past many years, the monthly NFP employment report which is issued the first Friday of every month at 8:30 AM EST has been an excellent mover for stock index futures like the Dow Futures.

You just need to find one or two stock index futures with which you’re comfortable -the ones that enable you to implement your strategies. You don’t need to trade every major index futures contract in the world to be successful. Just focus on one stock index futures contract and become its specialist or expert. You can become a successful futures trader in sometime with this approach.

The better off you are, the more you know about a particular type of a contract. So the best way to trade futures contracts is to become a specialist in one type of the contract like the Dow Futures or the S&P 500 Futures or NASDAQ-100 Futures.

You can use your knowledge of technical analysis to figure out how many days the Dow Futures contract tends to spend rising or falling using Bollinger Bands or Moving Averages. You can get an idea when the Dow Futures contract is likely to turn around. So by becoming a specialist in trading Dow Futures you can make a lot of profit daily for the daily movements in DJIA. This way you can become a Dow Futures swing trader. Every time profiting from a turn in the DJIA!

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Futures

dow futures, dow futures trading, Futures, futures trading

Hassam