Print Article for : Futures Trading For Dummies

Your Online Guide » Forex & Trading » Futures Trading

[F979]Futures Trading For Dummies

by Bob Miles, Bob

Futures trading, like any lucrative earning opportunity, involves high risks. Online futures trading is no different - its convenience tempts many people to treat trading like a Vegas casino instead of a legitimate investing opportunity. With this in mind, following are some pointers on succeeding in the online futures trading jungle:

Are you a long-term investor or a day trader? If you decide you're a day trader, then keep up with your trading account on an hourly basis. If you decide you're a long-term investor, then it is important that you resist the urge to check your account every hour or even every day, because short-term trends that are useless for your purposes may tempt you to trade when it is unnecessary or even harmful to your long-term interests.

Don't gamble with grocery money. Decide how much money you are willing to put on the table in advance, and stick with this budget no matter how fast you lose it. If you don't, online futures trading will become a vice that will put you on the street in no time. And if you're a beginner, stay away from highly fluctuating markets - you might want to consider starting with mini-futures.

Quit while you're still ahead. Nobody likes to sell after a good run, but in this game you should sell off a good run as soon as you spy a negative trend. If you don't then your new trading profits can grow wings and fly like a bird. Of course you run the risk of the “left behind blues” if your former acquisitions continue to appreciate. Getting out while you're still ahead is particularly important for day traders. The long-term investor needs to be concerned with weekly and monthly trends, not short-term peaks and valleys (unless, for example, you're trading coffee futures and there's a coup d'etat in Brazil).

Keep a good attitude. If you're a beginner, you will probably lose the futures trading game at first. Think of it as tuition.

Futures trading the dangers: are many, varied, and often unpredictable. The basic reason for this is that futures contracts are traded in a leveraged manner. An example would be a wheat contract, which would require a margin of $750. A wheat contract is 5,000 bushels of wheat. A fifteen-cent change in price would equal the entire margin of $750. That is fine as long as the price move was in the direction you expected. If it was in the opposite, you have lost all your margin money. A move like this can happen in a single trading day.

A severe weather change or a crop report can be a significant market mover. A change in government policy can cause the market to lock at the limit and those traders on the wrong side cannot get out of their positions, as there is no one willing to take the other side of the trade. This is why the market is locked at its daily trading limit. This happened in the grain market when President Ford announced there would be no grain trading with certain countries. This news came after the market was closed and when it started trading, it locked for five days in a row. A trader on the wrong side of this move was out thousands of dollars per contract in five days. Surprises are vicious in the futures market.

Stock traders get hurt trading futures, as a buy-and-hold trading style can be a killer in futures trading. Also, most stock traders do not short stocks. Shorting the market is an every day trade in futures. Futures traders do not care which side of the market they are on. They only want it to be the correct side.

Learning the futures trading dangers can be expensive and never ending. There is never a time when a trader has seen it all.

Article Source : Futures Trading

About Author

Both Bob Miles & Ken Charnley are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Bob Miles has sinced written about articles on various topics from Credit Cards, Types of Cancer and Marriage. The website offers information about all types of. Bob Miles's top article generates over 33100 views. to your Favourites.

Ken Charnley has sinced written about articles on various topics from Chapter 13 Bankruptcy, Cooking Tips and Bankruptcy Law. Ken Charnley is a personal finance publisher whose website is dedica. Ken Charnley's top article generates over 1000000 views. to your Favourites.