When it comes to investing your hard-earned cash, employing a futures trading system can give you the returns you’ve been looking for.
So what is a futures trading system? First, let’s start with the term “trading system”. A trading system is a set of rules that describe how to place trades for a basket of or a single security or commodity . It is very typical for these rules to be computer-based and to have the ability to run truly in a hands-free manner.
What are futures? The term futures describes a group of contracts that are openly traded on futures exchanges across the globe. While these contracts are technically agreements to transact an amount of the underlying asset at some point in time in the future, the simplest way to think of them like stocks that expire on a certain date. Some of the most heavily traded contracts include: gold, oil, treasury bonds, stock indices (like the Dow), and currencies.
So why should you trade futures? Trading futures gives that extra something special that is badly needed in a stock-heavy portfolio: diversification. It is quite common in the past that as stocks gain in value, futures tend to drop. And as stocks drop, futures tend to gain in value. This pattern isn’t perfect, but it is quite common. At other times stocks and futures can move completely independently of each other. This means that the futures market is only weakly correlated to the stock market. This is is a big advantage and it help an investor’s portfolio to survive the storm of stock market bull and bear markets.
And don’t forget that most futures are based on commodities: things like gold, oil, coffee, and wheat. These commodities are in global demand and are immune to the “fads” that can really take stocks for a ride. When prices around the globe for these commodities gain in value, we can gain from these price fluctuations by actively buying or selling commodities through futures.
Most importantly, why use a trading system? Trading systems are superior in a number of ways to a discretionary approach. Discretionary trading involves making non-systematic choices about in what and when to invest. By using a trading system, rather than making decisions on what “feels right”, you can make informed trade decisions based on patterns that have a high historical likelihood to win.
Secondly, and just as important, using trading systems offers a way to keep your emotions in check when making investment choices. How many times have you sold after a long losing streak and then you see your stock rocket back into the green and make up for all the losses, leaving you reeling? How many times have you bought when the security looked like it was a sure-fire bet that it would continue to gain in value, only to see your investment go down in the following weeks? We are all subjects to “herd mentality”, and being swayed by the herd often leads to bad trading choices. Thankfully by using systems, we can get around this faulty thought pattern and make truly objective trading choices.
Lastly, and possibly most important, using trading systems give you more free time. Why not enjoy your time, spend the weekend with your family, or be enjoying your hobbies, rather than endlessly debating your next portfolio decision. Because most trading systems are computerized, they run automatically, and this means you can spend your time doing what you love, rather than placing your trades. For those investors that aren’t computer savvy, there are legion of futures brokers will now faithfully trade your chosen system each and every market day for you and that means you don’t have to be involved in the day-to-day actions at all.
By now I hope I’ve made it clear why using futures trading systems is the smart way to reach your financial objectives. When it comes to your financial future, don’t guess. Invest wisely, use futures trading systems!
