bright futures http://www.artwoo.com Returned search results for bright futures Copyright 2008 Thu, 04 Dec 2008 20:26:03 +0000 http://www.artwoo.com/rss/bright+futures 4 Main Risks Involved In Futures Trading http://www.artwoo.com/article/4-main-risks-involved-in-futures-trading http://www.artwoo.com/article/4-main-risks-involved-in-futures-trading#comments Wed, 13 Dec 2006 10:27:10 +0000 futures tradingbusiness futuresknowledgeableexpenduse moneyno doubtfinancial instruments http://www.artwoo.com/article/4-main-risks-involved-in-futures-trading no doubt that is inherently a risky business. Anyone who tells you it is 100% risk free is either ignorant or trying to sell you something. The truth is futures trading is a gamble. There's no telling when you are going to win or when you are going to lose. The best strategy is to play this game based on the cards you have and hope for the best.

Futures trading does have huge rewards if you win and that's probably the reason many people are attracted to it. However the chances of you losing big is just as great if not greater particularly if you are new to futures trading.

I outline the 4 main risks when trading in futures. You might want to read further before deciding futures trading is suitable for you.

1. Speculative Business

Futures Trading is speculative in nature. No matter what the experts tell you or predict, it is not always 100% accurate. Take it with a pitch of salt. The best investment strategy is not to put all your eggs in one basket, divesting your investment among different .

2. Financial Backing

Futures Trading requires a large capital outlay at the beginning which is able. Therefore it is definitely not for the faint of heart. If you are thinking of making money in futures trading to pay your bills, then my advise is don't. You should not to pay your bills/loans/grocery to dabble in futures trading. Only use money you can afford to expend.

Ideally, a person who wants to play in futures trading should have at least $10,000 USD in his/her personal trading account.

3. Technical Knowledge

Futures Trading requires an intimate knowledge of financial instruments. At the very least, you should be in the 4 main investments categories namely, income, growth, speculation and inflation hedges. Without adequate knowledge, it will restrict you to where you can invest on the market and lose potential revenue on a particular sector of the financial market.

You might be thinking I can always rely on my broker for advice. While it's good to seek the advice of someone knowledgeable, you should be able to make intelligent decisions on your own and the only way to do that is if you have sufficient knowledge.

4. Only Invest What You Can Lose

I would not advise someone new to trading to dabble in futures simply because of the risks involved.

You should have a balanced portfolio with only a certain percentage invested in futures. My advise is about 10% but that depends on your financial standing and your investment strategy. In general, only use money that you can afford to lose in futures trading.

The 4 main risks I outline above is not meant to discourage you from futures trading. What I want to make clear is you fully understand the risks involved and also what you need to do to better your chances at winning in futures trading. Ricky Lim runs a futures trading site at http://futurestrading.onlinetradingpedia.com Visit his site today for more info on futures day trading and futures trading system. ]]> Unearthing The Crazy World Of Futures Trading http://www.artwoo.com/article/unearthing-the-crazy-world-of-futures-trading http://www.artwoo.com/article/unearthing-the-crazy-world-of-futures-trading#comments Tue, 06 Jun 2006 15:32:05 +0000 futures trading systemsfutures traderssuccess probabilitymoneygreedfearact http://www.artwoo.com/article/unearthing-the-crazy-world-of-futures-trading
1. High level of stress. 2. Huge risk.

It is true that many people are engaged in the Futures trading, many have become wealthy as well. If you are well known of the market, avoid and , and with it as serious investment opportunity, then the is excellent for you. Let us know about the requirements for futures trading. There are four requisites, which mainly influence your ultimate success in futures trading:

(A) Take futures trading as business enterprise; apply all orthodox business rules, management and judgment.

(B) Adopt predetermined trading plan - adopt established guidelines and set of rules, which are well known and valid.

(C) Utilize risk capital - make sure that if you lose the invested money, it should not alter your living standards.

(D) Psychological make-up.

Psychological make-up plays a significant role in futures trading. What type of person you are, how you act under pressure, your ability to think logically, your ability to make quick decision, the way you react under pressure, your power to make quick decisions, your personality, your character, your approach toward money - will regulate your success in .

Many futures traders let fear, pride and greed, determine their trading decisions. These futures traders oftentimes lose money due to their emotions. Futures trading system annihilates these problems by creating objective trading decisions on a coherent basis. will allow futures traders a chance to trade smartly.

An effective trading system must

Be totally objective. Be easy to use. Give clear purchase and sell signals. Keep draw downs to minimum. Produce large profits every trade. Take little time.

If you want to be a successful futures traders you should have futures software, at minimum it should include:

A ticker tracker: If you want to trade in a future, search for a ticker symbol of that future, get the futures quote, then make up your mind if you like to trade. A ticker is a specific 4-letter symbol distinguishing future. Charting: The software package must have a charting function. Market averages. A futures quote function. Market alerts. Market indices. Trading screens. News alerts.

One cannot yield to trade in futures trading without the impartial advice provided by good software. Christopher H. Waters writes on mseveral different. For more info on futures trading visit http://www.futures-trading-experts.info and http://www.futures-trading-guys.info.. ]]> Why You Should Consider Trading Futures http://www.artwoo.com/article/why-you-should-consider-trading-futures http://www.artwoo.com/article/why-you-should-consider-trading-futures#comments Thu, 13 Jul 2006 12:27:29 +0000 commodity futuresfutures marketfutures tradingmarket futuresfutures pricespork belliescommodity markets http://www.artwoo.com/article/why-you-should-consider-trading-futures commodity futures", which has no doubt turned many would-be traders away, folks who don't have any interest in things like and Frozen Concentrated Orange Juice (to include a few from the popular Trading Places film). The other factor is the perceived complexity of the . The fact of the matter, though, is that is incredibly diverse and not as difficult to do as many think.

Sure, for decades futures trading focused on the . That's a simple function of how they developed. Now, however, the focal point has shifted considerably. Yes, one can certainly trade agricultural good, energy products, and metals. These days, though, there is more action in things like interest rates, currencies, stock indices, and even stocks themselves.

What's more, technological developments have made the futures market much more accessible to the individual trader. It is now possible for even lightly capitalized traders to operate effectively in the futures market, something difficult to do in years gone by. That has opened up a whole array of new opportunities for the individual to pursue their trading goals.

Consider this. Nowadays just about anyone can trade things like Gold and Crude Oil. These markets have made enormous runs in recent years. One could also take positions in the US Dollar at a time when it has shown persistent weakness, or in US Interest Rates as they were steadily increased.

As for futures being complicated - not really. Are they different than trading stocks? Sure. They are leveraged instruments. That means they present some very exciting opportunities for traders who use them in the context of well developed risk management strategies (which all traders should have anyway, regardless of market).

move just like those in any other market. The same analytic techniques used to trade stocks or forex or any other market can be applied to futures. Their prices are, after all, based on those of the markets underlying them. That is why they are referred to as derivative instruments -- they derive their value from other markets. Stock index futures track stock indices. Currency futures prices move with foreign exchange rates. Single stock futures follow the prices of the stocks they represent.

Naturally, this derivative nature does mean some differences in the actual trading of futures as opposed to the markets underlying them. The concepts involved, however, are easily understood. It is possible for one with a basic understanding of trading and the markets to grasp them quickly and be operating effectively in the futures markets within only a short period of time.

If you haven't already done so - and if you've read this far it's a fair bet that you haven't - take the time to look at the futures market. They could very well provide you with the opportunity to make excellent strides in your profitability and risk management. John Forman is author of The Essentials of Trading. If you would like to learn more about the futures market and futures trading, go to http://www.theessentialsoftrading.com/FreeGuide-Futures.html to get your free 30 page guide. ]]> Online Futures Trading For Novices http://www.artwoo.com/article/online-futures-trading-for-novices http://www.artwoo.com/article/online-futures-trading-for-novices#comments Tue, 26 Jun 2007 02:15:01 +0000 futures tradingcoffee futuresterm investorurgeday traderfly like a birdpeaks and valleys http://www.artwoo.com/article/online-futures-trading-for-novices 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- or a ? 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 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 . 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 (unless, for example, you're trading 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. "Future Trading" at http://futurestradingguide.blogspot.com offers readers information about all types of futures trading. See also http://futurestradingguide.blogspot.com/2007/03/online-future-trading-how-t= o-avoid.html. Please bookmark "Futures Trading"! ]]> How to Learn From Simulated Futures Trading http://www.artwoo.com/article/how-to-learn-from-simulated-futures-trading http://www.artwoo.com/article/how-to-learn-from-simulated-futures-trading#comments Fri, 26 Sep 2008 21:01:41 +0000 simulated futures tradingrare gemstonefutures brokersfutures marketstrading futuresinvestment optionfake money http://www.artwoo.com/article/how-to-learn-from-simulated-futures-trading investment option, because a lot of people have managed to make it big . If you're interested in joining that elite group of successful individuals, but have no idea how to take that first step, then read on, because this article will tell you how to learn from .

The internet has made available countless of online tutorials and lessons on a wide variety of subjects, ranging from designing your own garden to designing your own website. Futures trading is no exception, and if you look hard enough, you'll be able to find a or two; a website that will impart to you all the knowledge you'll need to get started.

Sure, you've gotten the basics down, and you've got the theory etched into the back of your eyelids, but without practical application, the knowledge you've gleaned from all that reading and researching won't mean a thing. Previously you might have read about concepts and theories and strategies in your research; by the end of it you'll know the rules of the game.

But how do you play the game?

That's where a simulated futures trading program comes in. At this point, if you're a beginner, you might be asking yourself: What exactly is a simulated futures trading program anyway?

It's exactly what it says it is; a program that simulates the , one that allows you to apply all the theories that you've learned into practical application by practicing futures trading, without having to risk any real money. Many have made such programs available online for the usage of their prospective clients, usually free for a limited trial period of thirty days, but if you feel the need for more practice, you should be able to continue using the program for a nominal price. Simulated futures program may vary from one futures broker to the next, but they come pretty much standardized in certain aspects.

Normally you would be given a simulation account, with "fake" money to make trades with. You can use this money the way you would use "real" money offline, but of course, because it's a simulation, any losses you make won't burn a hole in your pocket. Along with the simulation account, the program would provide you with the same tools and information any real trader would have, and this is why learning through simulation is advantageous for beginners. Since the program is essentially a simulation of the real world futures markets, you would be exposed to the same exact market conditions as you would be if you were trading for real, and the simulation should give you a good measure of how you would fare should you delve into the real world markets. Every decision made in the simulation would be a determinant factor in your potential success or failure in your real trades, so it is imperative that you get the most out of your practice with the simulated futures trading program before embarking on the real deal.

Eventually the hands-on experience prior to your real dealings with the futures markets will prove to be invaluable, because at some point of the simulation you might feel that futures trading might not be for you. So rather than potentially having the bitter experience of losing your money in the futures market, and THEN deciding that trading futures isn't for you, you can easily back out from any further ventures with futures trading as long as you're still practicing with the simulated futures trading program.Click Here to gain access to your Online Trading Course today! Expert technical analysis, live trading videos and buy/sell signals all at http://www.trendlines.tv.]]> Online Commodity Trading - Learning To Trade Futures http://www.artwoo.com/article/online-commodity-trading-learning-to-trade-futures http://www.artwoo.com/article/online-commodity-trading-learning-to-trade-futures#comments Thu, 28 Jun 2007 05:20:01 +0000 futures contractfutures contractsagricultural futuresfutures traderfutures tradersoil futurescommodity futures trading http://www.artwoo.com/article/online-commodity-trading-learning-to-trade-futures Futures Contract?

A futures contract is a commitment to buy a commodity with an inherent value at the date specified. It's used by the people who produce those commodities to regularize their income streams and protect themselves from excessive market volatility. Examples of futures are , steel futures, like corn, soybeans, sugar and wheat, or pork bellies. Any kind of product that's produced in large quantities with regular production cycles, lead times of more than a month, seasonable variations in availability and price, and near constant demand for the raw material can be the subject of a futures contract. Futures can be thought of as agreements to sell or buy commodities at a specified price in the future, regardless of the market conditions. If you need the commodity in question, you may buy futures to hedge against a future rise in price. If you sell the commodity in question, you're buying futures to hedge against a decrease in price.

Buying and selling allow people to buy and sell the commitments to buy products in respond to market pressures. Unlike stock portfolio or bond investing, you aren't buying a chunk of a corporation or a debt commitment to be paid back with interest, you're taking a gamble on the future price of a commodity. Futures trading is risky, as is any kind of investment, but some of the risk can be ameliorated by taking on a diversified portfolio.

What Makes For A Good ?

The personality type that thrives in futures trading is that of the professional gambler, the person who is certain that their instincts on the way commodities will flow will beat the market trends. (It is possible to take buy-and-hold positions with futures, but that tends to be less lucrative and less volatile.

In general, it's also less sound than buy-and-hold strategies for stocks and bonds.). Backing up that instinct is a lot of technical analysis. watch all the news =96 for example, news about the weather directly impacts growing seasons for commodities such as corn, soybeans and sugar. News about port regulations impacts futures relating to delivery of durable goods and oil from overseas. News about increases in production capability at refineries, or improvements in oil extraction techniques can change the price of oil =96 and often in counterintuitive directions!

There is a lot to learn to become a successful futures trader; you'll want a mentor, and a couple of classes to learn the terminology, the regulations, and how to spot market trends (and how to divorce yourself from your own analysis, so that you don't blind yourself to important trends because you're in love with your own ideas.)

Interestingly, while futures are contracts meant to reduce risk between producers and purchasers of commodities, the trading of futures is a high volatility market. While there is risk, it can be (somewhat) ameliorated, and there are often trends that are easy to pick out that will help you avoid risk. The key to being successful as a futures trader is knowing when to NOT gamble, when to take what you've got and call it a day with a reasonable return on your investment. Add your Online Trading website to our Stock, Currency and Commodity Trading Directories for free! - http://www.123onlinecommoditytrading.com - http://www.123onlinecurrencytrading.com - http://www.123onlinestocktrading.com ]]> Should You Invest in Futures Trading? http://www.artwoo.com/article/should-you-invest-in-futures-trading http://www.artwoo.com/article/should-you-invest-in-futures-trading#comments Wed, 20 Aug 2008 08:57:24 +0000 hog futures contractextreme weather conditionshog pricescommodities marketacceptable lossesstocks and bondsfutures market http://www.artwoo.com/article/should-you-invest-in-futures-trading stocks and bonds. When you purchase stocks and bonds you have physically bought something that you own, but that is not the case with futures. In futures trading you are speculating about whether the price of a commodity will rise or fall.

For example, let's say that you decided to speculate on hogs. If you thought that would be rising in the future you would purchase a . If you thought that hog prices would be falling then you would sell your hog futures contract. Whether you wanted to buy or sell, there has to be a buyer and a seller.

Investors are attracted to futures trading because it isn't terribly complicated. In traditional stock markets there are literally thousands of stocks to choose from, whereas in the there are only about forty markets to speculate on.

Another reason why investors like futures trading is because it is very easy to buy or sell futures. The futures market is affected by the such as droughts, hurricanes, tornadoes, and freezes because these can affect agricultural crops. Money can be made whether prices go up or whether prices go down. Still, another reason that futures trading is viewed so positively is that commission fees are much lower than those paid in stock trading.

The most important reason that traders dabble in commodities is because there is an enormous opportunity for big gains in a short period of time. Of course, the potential for big profits exists because there is a risk for huge losses as well. No trader should ever get involved with the with the intention of getting rich quick. Those who do that usually endure huge losses. Only take risks that you construe to be .

You can begin trading in the commodities market with small purchases.

The smaller the trade you make, the less that you risk. You can still make profits on small trades, but it may take you quite a long time. Gains and risks are interrelated. The more that you put at risk means that there is more to be made in gains. The trouble is that you must be able to manage your risks. No one can consistently make the right calls about what to buy and sell, so at some point you will be wrong.

Never invest more money than you can afford to lose. The other way to minimize your risk is to put a stop loss order in. The stop loss will automatically kick in when it reaches your set price and then your commodities will be sold so that you can stop the loss from getting too bad.

If you think you can handle these risks, then give futures trading a try. Just make sure you have agood, time tested, trading system and the discipline to follow it. Futures trading is like any business. There are ups and downs to contend with.Mark Crisp is the momentum stock trader. Finding the hot stocks that are going up right now and will continue to go up in the future. Sign up for my free e-course at: http://www.stressfreetrading.com]]> Understanding Futures Trading http://www.artwoo.com/article/understanding-futures-trading http://www.artwoo.com/article/understanding-futures-trading#comments Sun, 16 Jul 2006 06:27:07 +0000 futures contractsfutures exchangefutures traderscommodity futures tradingcommodity exchangesvice versaprice http://www.artwoo.com/article/understanding-futures-trading commodity futures trading is very difficult to understand. It may only seem difficult when you are new to futures trading, but once you understand the inner workings and get a hang of it, you will be well on your way to success.

People have a common misconception that determine or establish the s at which commodity futures are bought and sold. This is not true. Prices are determined by supply and demand conditions. Just keep in mind that if there are more buyers than sellers, prices will be forced up and .

Buy and sell orders, which originate from all sources and are channeled into the exchange-trading floor for execution, are actually the ones to determine the prices. These buy and sell orders are translated into actual purchases and sales on the trading floor.

The major function of the futures market is the transfer of risk, and increased liquidity between traders with different risk and time preferences, for instance from a hedger to a speculator. Futures trading is a method used to eliminate or minimize risks that occur when the prices in the market fluctuates.

are exchange-traded derivatives. A futures contract is traded on a , to buy or sell a certain underlying instrument at a certain date in the future, at a pre-set price. Futures contracts are basically for assumption or hedging.

There are two groups of : the hedgers, who are interested in the underlying commodity and are seeking to hedge out the risk of changes in price; and the speculators, who are interested in making a profit by predicting market moves and buying a commodity andquot;on paperandquot; for which they have no practical use. For example, commodities in the market can be bought today at today's price, with the speculation of selling them at a higher price in the future.

On the other hand, hedging protects against fluctuations in market prices. This protection is made by allowing the risks of price changes to be transferred to professional risk takers. For instance, a manufacturer can protect itself from price increases in raw materials they need by hedging in the futures market.

Hedging has two types, hedge sale and hedge purchase. A person can buy a commodity and sell futures at the same quantity as protection against fluctuation in prices when he is still holding the stock.

You might think that this is gambling, but the fact is that speculation refers to the condition of a legitimate enterprise based on the current condition of the market trends. However, it is very risky for inexperienced futures traders who try to predict the market and speculate without having enough resources or experience.

Since the prices are distributed via telecommunications network and the internet, it makes online futures trading very convenient and simple for an individual. Nowadays many brokers offer their services for trading commodity futures online. Because more risk is involved in online futures trading than stock trading, you must judge for yourself whether or not it is worth the added risk of trading commodity futures online.

Keep in mind that an investment in futures can result in losses. Past performance results does not necessarily indicate future performance results. For a more comprehensive look at Futures Trading, visit Susan's site at http://www.futures-trading-expert.info. Susan also enjoys writing on a wide range of topics at http://www.health-and-fitness-hub.info. ]]> 3 Great Advantages of Futures Trading http://www.artwoo.com/article/3-great-advantages-of-futures-trading http://www.artwoo.com/article/3-great-advantages-of-futures-trading#comments Fri, 26 Sep 2008 21:08:32 +0000 extreme weather conditionscommodities futuresfutures contractsbroker commissionsfutures tradingfutures marketstrading futures http://www.artwoo.com/article/3-great-advantages-of-futures-trading futures trading is the fact that it isn't too complicated. The problem with typical stock markets is that there are thousands and thousands of stocks available, and to some that might seem like too daunting a figure to deal with. With , a speculator has only a handful of markets -- about forty -- to choose from. Just as it is easy to choose from that handful of markets, it is also easy to speculate because the markets are affected by like storms or droughts. A decision to buy or sell can be made within moments of a weather report broadcast, and there is always a chance for profit whether prices go up or down.

There are in fact many advantages of futures trading. For this article, we will look into 3 of the best reasons why you should consider futures trading.

Small Commission Charges

Compared to other investments, the commission charges for futures trading are relatively small, and paid only after a trader's position has ended. The commission charges may vary, depending on the service level of the broker. Commissions involving online brokers may be as low as $5, while brokers who provide full service in terms of advice on the trades made can charge up to $50 per trade. For a broker in a managed trading commission controlling all trading decisions at his discretion however, the charges can go as high as $200 on each trade.

Paper Investment

When you purchase stocks or bonds, you actually own that particular investment, but with futures it's a little bit different. does not require the trader to have or own actual physical goods on hand in order to trade them, because all the trader is really doing is speculating with . It really is just a paper investment, like an insurance policy or a monetary bet. There are no physical goods involved in the exchange, and the actual commodity in the contract that is being traded is only exchanged on rare instances when the delivery of the contract takes place. For most futures traders (who are usually speculators themselves), the trade is a paper transaction, pure and simple.

High Leverage

The fact that futures contracts are highly leveraged financial instruments means that an investor can go into the market with a relatively small investment -- called margin -- and potentially come out reaping large profits. The concept of investors having to pay the 'margin' is comparable to a security bond, whereby should the trader make a loss on his trade, he may lose some, all, or even more than what he put up. However if his market predictions turn out to be correct, he gets back his margin and whatever profit he might have made, the profit usually being ten-fold on a 10% margin. In comparison to other investments, futures trading offers an excellent return, and this is why it is one of the best advantages of futures trading.Click Here to gain access to your Online Trading Course today! Expert technical analysis, live trading videos and buy/sell signals all at http://www.trendlines.tv.]]> 3 Easy Steps to Profitable Online Futures Trading http://www.artwoo.com/article/3-easy-steps-to-profitable-online-futures-trading http://www.artwoo.com/article/3-easy-steps-to-profitable-online-futures-trading#comments Fri, 26 Sep 2008 21:29:35 +0000 online futures tradingprice momentumhuman psychologybasic principlebreakoutsfinancial instrumentsinner workings http://www.artwoo.com/article/3-easy-steps-to-profitable-online-futures-trading financial instruments. But like all things in life, it's only hard because we don't understand it fully. The that you need to remember is that the bigger the risk, the bigger the potential payout, and this cannot be any truer for . Online futures trading can be profitable once you understand the concept and in its entirety; get the hang of it and be on your way to online futures trading success. You'll also need the right attitude; think you can succeed, and you will.

The first step to profitable online futures trading is the method you employ on a trade. Day trading is a common practice, but in order to rake in the profits you'll need to catch the big trends, and the way you can catch them is by using the breakout method.

What exactly is the breakout method?

It is a system whereby the trader capitalizes on the moment when carries a stock beyond the breakout point, far enough for the trader to grab a profit. Such trades can be long or short, depending on the direction of the break. Most traders lose most of their money because they don't use a breakout system, and this is where you can learn from their mistake. By using a breakout system the right way, you can win big at futures trading. Step 1 of profitable futures trading is to trade on .

So what's step 2? Many traders lack the confidence to stay with the system for long, and this is where they fail. It boils down to simple ; out-psyche your competition. You need to have the discipline when others don't, and you need to understand money management well in order for your trades to be profitable. Every investment has a risk, and a lot of traders would rather stick with as little risk as possible. So in order for you to make it big, you need to take the risk when others aren't. Of course you shouldn't be rash about it; take a calculated risk when you see a trade worth making. You might not be trading a lot this way, but every trade that you do make will be the best ones anyone else might not have dared to capitalize on.

Step 3 to note is that about 90 percent of traders fail when trading futures, so avoid being part of the statistic by trading in isolation. It is imperative that you stay focused and not let the news or doubtful traders or even your own doubts affect your staying power. Those who fail at trading futures only have themselves to blame, because they allow themselves to be swayed by the hearsay of others who tell them that they are wrong, that they're taking unnecessary risks. It's important for you to remember the basic principle of investing, as mentioned in the first few lines of this article: the bigger the risk, the bigger the payout. Discipline is crucial if you want to earn bigger returns from online futures trading, and you must not let others sway you from your decision to stick with your chosen strategy.

So there you have it. By applying these 3 easy steps to profitable online futures trading, you too can win big at futures trading. All it takes is discipline and a little bit of confidence!Click Here to gain access to your Online Trading Course today! Expert technical analysis, live trading videos and buy/sell signals all at http://www.trendlines.tv.]]> Futures Trading in the Forex Market http://www.artwoo.com/article/futures-trading-in-the-forex-market http://www.artwoo.com/article/futures-trading-in-the-forex-market#comments Thu, 31 Jul 2008 02:57:21 +0000 chicago mercantile exchangeobjective viewsfutures markettrading futuresbrokerage feesprofitable fieldvolume traders http://www.artwoo.com/article/futures-trading-in-the-forex-market profitable field. requires looking at different aspects compared to regular Forex trading. Investors look into areas like history and . Other aspects that set both fields apart are fees, margin necessities, liquidity, practicality, and the technical and informational resources available for each service.

Regular Forex vs. Futures Trading
Futures trading is said to be more viable then regular Forex trading. The is generally more liquid and is often said to be more profitable for traders. It is however more complicated to analyse then regular currency trading. One of the main advantages with futures trading is that there are no commissions and the depth of information available from agencies and available websites.

Futures Trading in Currencies vs. Futures Trading in the Stock Market
In the stock market it is necessary to engage all trading through a broker or agent in matters of transactions and also receiving price quotes. Futures trading in Forex however have no middleman or agent so these costs are absent. This in turn increases investor's margins and decreases losses if incurred. These extra do skim away at investor profits and can add up to a significant amount for high .

Investors are advised to make portfolios to track past investments and track profits on various trades done. This serves as a tracker to allow investors to speculate on future investments.

Both futures generally work in the same manner. The key difference is that Forex futures are not traded in a centralized exchange, instead it is available in many different exchanges around the world. The majority of Forex futures are however done through the and its partnering brokers.

Investors who wish to preview past market trends can visit Forex charts which aid in forecasting future results. Trend forecasting can never be 100% accurate and returns are not always guaranteed but this is common for any kind of trading. This is why it is important for investors to continually monitor "predicting oscillators" in the charts to anticipate swings and fluctuations.

Despite there being no commission or transaction fees traders and investors will still lose a bit of their margin in the spread. The spread is the percentage difference in the buying and selling price of currencies. This is common in both regular Forex Trading and Forex futures trading. However Forex futures trading is still considered the most lucrative form of trading according to research.

Both futures trading in stocks and currencies have their upsides and downfalls. Research and assessment show that futures trading in currencies are far less volatile then stock market trading. This, both reduces the chances for high profits or high losses. Risk-averse traders may find more comfort in Forex futures trading as a result of this. It is also shown to be more profitable in the long run compared to the stock market. It is also used by many to hedge currency fluctuations.

Arkaitz Arteaga http://www.MarketStock.netI have a degree in Computer Systems Engineering. I've been working in the world of forex trading and stock market investing.I also have been building a variety of websites for the last 3 years.For more information about Stock Market visit Stock Market - MarketStock.netFor more information about Forex visit Forex - MarketStock.net]]> An Introduction to Online Trading Futures http://www.artwoo.com/article/an-introduction-to-online-trading-futures http://www.artwoo.com/article/an-introduction-to-online-trading-futures#comments Fri, 26 Sep 2008 21:15:28 +0000 new york cotton exchangechicago board of tradetrading futuresfutures contracttrading commoditiesprice fluctuationsfutures trading http://www.artwoo.com/article/an-introduction-to-online-trading-futures futures trading, and with these uncertain times and the advent of the internet, getting online and just might be the best thing you've ever done.

For the benefit of those entirely new to trading futures, let's start with the basics. Trading futures work like an investment plan for traders; it involves on the concept that traders speculate on the of a particular commodity. Normally there is a contract, which is essentially an agreement between traders to buy or sell a particular commodity at a particular price at a particular time in future. The , as it is called, typically has a standard price, quantity, and date of delivery. Simply put, the buyer and seller of the contract are guaranteed a specific price for a specific quantity of the commodity at the point of trade. Trade does not take place on the stock exchange, since futures are considered different from stocks. The , the , and the New York Merchantile are just some of the locations where futures are traded in future exchanges.

So why futures? Futures can be a very profitable financial instrument in your investment portfolio if you have a sound trading plan. In the early 1970s, Richard J. Dennis, a former commodities speculator, was able to turn a loaned $1,600 into $200 million over the course of ten years. Of course, not all of us can achieve that level of success, but why turn away a piece of that lucrative pie when the possibility of making good money from it is there? The potential in futures trading is there for the taking, and with the internet, trading futures has never been easier.

There are many websites - set up by brokerage firms - that allow you to get online trading futures. All that is required of you is to register an account, and then to download trading software that will allow you to start trading online. Certain sites will even provide you with services of how you'd like for your commodities futures trading to be executed, like automated system execution, self-directed online execution, and broker execution.

Specially developed for online futures trading, the automated system execution service is an automated commodities trading system that makes your trading decisions for you. You can also create your own automated system that can help you execute trades on your behalf.

On the other hand, if you're confident enough to make your own decisions and execute your own trades, then go for the self-directed online execution service. You will be provided a trading platform by the brokerage services that would allow you to make informed decisions with regards to your trades, and give you full access to execute the trades yourself.

But if you're a beginner, your best bet would have to be the broker execution service. Because of your relative inexperience as a beginner, it would be better that you leave the trade decisions to your broker, who will make the trades for you on your behalf. Perhaps after you've gained enough experience and confidence in the market, you can then consider the other two choices mentioned above.

Getting online trading futures is really as simple as it seems, but like most cases, caveat emptor applies in your search for the online trading platform that might be best suited for your level of knowledge.Click Here to gain access to your Online Trading Course today! Expert technical analysis, live trading videos and buy/sell signals all at http://www.trendlines.tv.]]> Forex Versus Futures Market - What Is The Difference http://www.artwoo.com/article/forex-versus-futures-market-what-is-the-difference http://www.artwoo.com/article/forex-versus-futures-market-what-is-the-difference#comments Wed, 11 Oct 2006 06:27:08 +0000 futures marketfutures contractterm contractsfresh strawberriescommoditiescommoditylocusts http://www.artwoo.com/article/forex-versus-futures-market-what-is-the-difference fresh strawberries during the winter.

1. The

The current futures market, of course, includes far more than just foods! It is a market for all sorts of including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds. A states what price will be paid for a product at a specified delivery date.

2. Playing The Futures Market

When an investor plays the futures market, the actual goods are not important and there is no expectation of a real delivery. After all, or the elements of nature could destroy the crop. As such, the value of the contract itself changes daily according to the market value of the .

3. How Transactions Work

A futures contract has a buyer and seller. The contract specifies the buying price, a quantity of goods, and a delivery date. You can never lose money on a futures trade - you will never pay more than the initial amount of the contract. By locking in prices at a fixed rate, you ensure that you will still get that price years from now, protecting against price raises. On the other side of the coin, if the value of the commodity drops, the producer will make money.

4. How Is Profit Made?

In the end, investors are hoping to profit from the daily fluctuations of the market. They buy long and hope the market will rise the value of the commodities. This way, they can buy low and sell high. Alternatively, those wishing to sell their goods can offer short term contracts if they expect the value of those items to go down.

5. The FOREX Market

FOREX is trading in currencies. It is therefore very liquid in nature - you will never get stuck with two hundred boxes of strawberries that have to be sold within 2 weeks or they will go bad and youll lose a lot of money. Far, far less slippage occurs in the FOREX market compared with the futures market. Slippage is a term that refers to you losing money.

6. Always Open

While most futures exchanges can happen 7 hours in any given day, FOREX is open 24 hours a day for trading. This makes futures far more liquid, able to take advantage of trading opportunities as they arise.

7. No Commission

Traders pay a fee for each transaction they enter into instead of having to pay commissions to brokers. There is a very high volume of trading FOREX transactions are almost instantly executed. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade - not necessarily the price of your trade. For more great forex market related articles and resources check out http://commoditiesnfutures.info ]]> Using Stops Helps You Make Money Trading Futures http://www.artwoo.com/article/using-stops-helps-you-make-money-trading-futures http://www.artwoo.com/article/using-stops-helps-you-make-money-trading-futures#comments Wed, 12 Apr 2006 23:00:05 +0000 futures marketearning moneymake moneytrade positionsmarket directioninsurance limitsbuying insurance http://www.artwoo.com/article/using-stops-helps-you-make-money-trading-futures
The more you understand about any subject, the more interesting it becomes. As you read this article you'll find that the subject of Futures is certainly no exception.

To in the , setting stops is at best an imprecise science and to some an art form involving a lot of trial and error, but it is an essential part of being a successful trader. An analogy is to compare the use of stops to . Both are a necessary evil for survival in business. Should you avoid insurance altogether just because you're not sure exactly how much you need, or because it will cost you a little money? No. Instead, you estimate and do the best you can, knowing in the end it will be well worth the effort for your long term preservation.

Where risk of loss due to unforeseen disasters, stops limit your risk of loss on bad . Stops, properly placed, make it possible to take small losses and get out of a trade when a futures position moves against you, protecting your capital. Yet, some traders find the use of them distasteful and are willing to risk large losses of capital on an ill advised futures trade. Why do they do it? Simply because they don't want to admit that they made a mistake in predicting .

A vital key to in the market, one that often separates a good trader from a bad one, is the ability to take small losses. Your goal, as a successful trader, is to take small losses and make big gains. If you do this, you'll be profitable. But what if you are stopped out of a futures position you still want to trade? There is a good chance you can buy it back later, and most likely at a better price, if the trade still has merit.

So far, we've uncovered some interesting facts about Futures. You may decide that the following information is even more interesting. Those of you not familiar with the latest on Futures now have at least a basic understanding. But there's more to come.

Stops are valuable assists that should be used to limit risk and help you accept small losses when you are wrong and because they protect profits on winning trades. You must lock in your profit when you trade, or you can lose it. The use of a trailing stop can ensure that you keep your gains. A trailing stop is a stop order you place below the current price of a long position, progressively moving it up as the price of the position increases so that the stop follows the position up. Conversely, for a short position, you set a stop above the current price and then move it progressively down, following the position as it trends downward. This little technique will help keep you profitable and a happier trader.

This means that once you have a profit, you move your stop nearer to the current price so if and when the position moves against you, most of your new profits are safe. If the stop executes and you decide you want to trade the position again, you can buy it back at a better price than you sold it for and then ride it up again. That's how a good trader makes and keeps money; you make money in the futures market by taking small profits multiple times and not risking too much waiting for one big win. Remember, in all markets, the pigs get eaten.

Don Jesel, a surviving futures day trader of 20 plus years.

That's the latest from the Futures authorities. Once you're familiar with these ideas, you'll be ready to move to the next level. When word gets around about your command of Futures facts, others who need to know about Futures will start to actively seek you out.

More information can be found at http://www.futurestradingsite.com">http://www.futurestradingsite.com About The Author: Don Jesel is an established surviving futures day trader of 20 plus years and web master for http://www.futurestradingsite.com">http://www.futurestradingsite.com ]]> An Initiation To Commodity Futures Trading http://www.artwoo.com/article/an-initiation-to-commodity-futures-trading http://www.artwoo.com/article/an-initiation-to-commodity-futures-trading#comments Tue, 12 Jun 2007 16:30:00 +0000 commodity futures tradingcommodity tradingtime in japanpurchase contractspredefined timedeliver the goodscontract price http://www.artwoo.com/article/an-initiation-to-commodity-futures-trading
, as we know it today, came about for the first in the 17th century, where rice was traded in future contracts. It was a period when farmers and buyers came together and decided to commit to each other future prices negotiated on suitable terms in exchange of grain for money. For example, a dealer would agree to buy a ton of rice at the end of the next month for a certain price from a farmer. This would be ideal for both parties, as the farmer would know how much he would get for his rice in advance, and the buyer could plan to raise the money he needed for the purchase. Contracts such as these became more and more popular and common, and were even used as collateral for taking loans. If the buyer could not take delivery of the rice, he could sell the contract to someone else. On the other hand, if the farmer could not , then he could hand over the contract to another farmer. Thus began commodity futures trading, as we know it today.



What Are Commodity Futures?

Today, most of the futures exchanges are set up in a similar way. Members of the exchange do the actual trading on the floor. Stock stands for equity in a public company, and can be held as long as you want, whereas commodity futures trading contracts have a specified life. In the past, people used commodity futures trading methods generally to hedge risks and fluctuation in prices, or to take advantage of them, and not for actually buying into the commodity. The idea is that a contract requires delivery of the commodity within a certain period unless it becomes null and void. The person buying the commodity futures trading contract agrees to buy the specified commodity at a fixed price on a certain date. The person selling the commodity futures trading contract agrees to sell the commodity at a certain price on a certain date. As time goes on, the fluctuates, and this brings about profit and loss in the trade. It is to be noted, however that, the delivery generally doesn't take place. The contract is usually liquidated before its expiry. The entire trade is based on the idea that there will be no delivery, but we can speculate on the price of the underlying commodity at a future time to make money. Commodity futures trading is done all over the world now.

Different Types Of Commodities

There are many types of commodities that are traded in the international market. These can be very broadly categorized into the following:

=95Precious metals like Gold, Platinum, Silver, etc., =95Metals such as Aluminum, Copper, Steel, etc., =95Agricultural products like Rice, Corn, Oils, Cotton, Wheat, etc., =95Soft commodities such as Cocoa, Coffee, Tea, Sugar, etc., =95Livestock like porkbellies, cattle, etc., =95Energy commodities like Crude oil, Gasoline, Gas, etc. David Rivera has traded commodities and options for one of the largest cash trading firms in the world. He currently owns and runs the following websites: Futures and Options Simulated trading: http://www.futuresoptionspapertrading.com Options Secrets course: http://www.deltaneutraltrading.com Price and Time trading: http://stock-commodity-trading.com ]]> Understanding Futures Trading http://www.artwoo.com/article/understanding-futures-trading http://www.artwoo.com/article/understanding-futures-trading#comments Thu, 16 Nov 2006 14:27:08 +0000 commodity futuresfutures tradingfutures marketsfutures tradersfutures marketcommodity pricescommodity exchanges http://www.artwoo.com/article/understanding-futures-trading futures trading. Experience combined with patience can make such a transaction very lucrative. It involves the trading of tangible items, like silver, gold, oil or even crops. This practice is based on your ability to predict the future price of a commodity. Companies and individuals alike make investments in futures trading. The wisest way to begin futures trading is to set your financial goals and conduct a well-planned research, before you get into it. Consider hiring a professional broker because even though it may be initially expensive, the expertise of the broker will help you to avoid the common novice mistakes.

Future trading endeavors can either be very beneficial or utter failures. Everything depends on how smart your moves and decisions are. You can be on your way to success, once you get an idea of the operations involved in this trade.

These are a few points to keep in mind:

- Remember that the prices at which the are sold is not determined by the . Prices are established on the demand and supply conditions. If the sellers are more than the buyers, the prices will decrease and vice versa. They are also determined by the buy and sell orders.

- s are considered clearing houses for the current demand and supply information. Buyers and sellers of financial instruments, agricultural commodities, petroleum products and metal meet in these markets.

- The primary purpose of a futures market is to provide an efficient method to manage the price risks.

- Hedgers and Speculators are the two groups of . - Hedgers: They place their interest in underlying commodities and try to avoid the risk included in the change of the . You can be protected against the fluctuations that take place in market prices by hedging. Transferring the risk to a professional risk taker is involved. For instance, if you are a manufacturer, you can protect yourself from the fluctuations in the price of raw materials by hedging in the futures market. Hedging includes hedge sale and hedge purchase. You can buy and sell futures of the same quantity, as a protection against the risk in price change, while you still hold the stocks.

- Speculators: They predict market moves and buy commodities of no practical use to them. They purchase these commodities 'on paper' and make a profit out of it.

- If you do not have the required experience or resources, it is advisable for you not to attempt speculating or predicting the market. Future performance results cannot be based on the results of your past performance.

- Futures contracts are traded on a futures exchange. They are standardized contracts that help in the buying and selling of a certain commodity, at a certain pre-set price and date. This contract gives the right to buy and sell, unlike the options contract that does not.

The advancement in technology and electronic communication has introduced new and better tools for futures trading. However, you could end up losing thousands of dollars if you do not execute the procedures involved correctly. Joe Kenny writes for the UK personal finance sites http://www.ukpersonalloanstore.co.uk and also http://www.cardguide.co.uk ]]> A Review of the Trend Lines Forex and Futures Video Forecast Service http://www.artwoo.com/article/a-review-of-the-trend-lines-forex-and-futures-video-forecast-service http://www.artwoo.com/article/a-review-of-the-trend-lines-forex-and-futures-video-forecast-service#comments Sat, 11 Oct 2008 16:43:22 +0000 high yield investmenttrading futuresforecast servicetrend linesinvestment gamevaluable toolsforex http://www.artwoo.com/article/a-review-of-the-trend-lines-forex-and-futures-video-forecast-service
When you look at the investment opportunities that you might looking for, you'll soon discover that there are many things that you have to keep in mind and that if you don't keep your head, you might end up losing money that you cannot afford to lose!

For many people when it comes to the world of and , good information is worth more than gold and unless you can really move ahead and get the options that you are interested in, you'll soon discover that there are plenty of options open to you when it comes to looking at what you want, especially when you start looking at the Forex and Futures Video .

The Trend Lines Forex and Futures Video Forecast Service is one of the most that you can have helping you along when it comes to looking into what kind of options you have in front of you. If you want to play a high risk, game, you'll soon find that playing it without any good information coming in can be a truly negative and horrifying experience.

And if you find that you are able to move forward and to get the options that you need that you will need good sources to do so. When you are looking at the very options that are in front of you, you need to consider where you are getting your information from, and with this in mind, you need to think about things that involve good motion and you need to make sure that you stay on top of it.

Just like having Trend Lines Forex and Futures Video Forecast Service on tap can help you, you'll find that actually not having it will hurt you. Think about the traders who have lost a great deal of money when they forget to check the daily, weekly and monthly charts that are available to them.

You'll find that you can have a five-year at a glance market that is important and comes with all of the trendline date already mapped out for you in advance. If you want to take advantage of data that has already been compiled and put together in a way that will be easy and straightforward when it comes to reading it, you'll soon discover that the Trend Lines Forex and Futures Video Forecast Service is something that you need to think about.Let Investment Review Kings Brian Keith Garvin and Jeffrey D. West present to you more about Trend Lines this very second. You can without notice visit our website as we have a myriad of wherewithal to help you find what you want, with no obligation.]]> How To Trade Mini Futures Contracts Successfully http://www.artwoo.com/article/how-to-trade-mini-futures-contracts-successfully http://www.artwoo.com/article/how-to-trade-mini-futures-contracts-successfully#comments Tue, 05 Feb 2008 08:20:01 +0000 soybean marketsfutures contractscontract chartscorn wheatcommodity contracttrade commoditiestrading commodities http://www.artwoo.com/article/how-to-trade-mini-futures-contracts-successfully trade commodities? In a word, yes.

You don't need $20,000, or even $5,000, to be a successful commodity trader. The mini- were designed to fill the gap that exist between the high roller large accounts and those that only have a couple of thousand dollars to invest.

New traders are told to stay away from mini-futures because there is not enough contracts traded and you can lose all your money. That statement is true, and applies to trading standard as well, if you plunge right in without first learning your craft.

Mini futures provide excellent trading opportunities for the small trading accounts.

It does not take a trading genius to make money trading mini commodities, just a little common sense and patience. There is nothing mystical about nor are there any great secrets to trading.

Standard and mini futures look all most identical.

The major difference is the volume of contracts traded is much less that that of a standard futures contract. It should be noted that standard size contract charts can be used to find trades for the Mini Futures market simply because the mini-futures, for all practical purposes, mirror the standard size contracts.

Currently there are four groups of futures contracts that trade the mini contracts.

AAgriculture. Long term trading

1. Wheat 2. Corn 3. Soybeans

BCurrencies. Extremely risky

1. Euro FX mini 2. Japanese Yen mini

CPrecious metals. Extremely risky

1. NY Gold mini 2. NY Silver mini

DIndexes. Extremely risky

1. Nasdaq 100 2. Russell 2000 emini 3. SandP 500 emini

A new trader should stick to the first category to learn the proper way to trade commodities. There is still a risk in the corn, wheat, and but it is reduced a great deal with the mini contracts. The other three categories do have mini contracts. However, they can be extremely volatile and wipe out a trading account in a heart beat.

Trading mini futures contracts can give new traders a chance to gain experience while building confidence and cash in on the fabulous profits being made in the futures markets. It does not take a small fortune to learn how to trade commodities.

Current margin (performance bond) required for a mini wheat contract is $400. One point (Cent) on a mini soybean contract = $10. With proper money management a new trader can slowly build their trading account and at the same time learn the craft of futures trading.

There are fortunes being made by commodity traders (speculators) every year. The best part about being a commodity trader is it does not matter if the markets are going up or down. You can make money even if the economy is in a recession.

Over night fortunes are very rare to non-existent in commodity trading.

However, you must understand perfect trades do not happen every day and it will take some experience to spot them. Mr. Larry Williams, a recognized trading professionals, made the statement "You don't have to take every trade; just the winning ones." Patience is one of the key ingredients of successful trading.

It's tough sitting on your hands and not jumping on every trade but it pays off in the long run.

Always remember. Commodity trading is an extremely risky business. The first rule of a successful commodity trader is Plan Your Trade! Trade Your Plan! Richard Tolar survived a ruptured brain aneurysm six years ago. Up until that time he was a very successful futures trader. He is passing on his knowledge with this series of articles. Pick up his free ebook "How To Trade Price Patterns In The Futures Markets" at http://www.myfuturesblog.co ]]> How to Choose a Futures Trading System http://www.artwoo.com/article/how-to-choose-a-futures-trading-system http://www.artwoo.com/article/how-to-choose-a-futures-trading-system#comments Fri, 18 Jul 2008 08:15:20 +0000 stock index futuresfutures trading systemsfutures trading systemtrading futuresagricultural energyaccurate reportprecious metals http://www.artwoo.com/article/how-to-choose-a-futures-trading-system Trading futures can be risky business if you don't have a reliable, quality system to back you up. With all the s on the market today -- including some that could set you back a few grand -- how do you find the trading system that's right for you? Here are some factors to check when you're deciding on a trading system.

Look at which markets the system trades

Naturally, this will depend on which futures you're most interested in. In general, though, look for a trading system designed to trade major commodity, currency and . This includes agricultural, energy such as oil and coal, softs like coffee and sugar, and . That said, most trading systems will work better the more liquid the market.

Check out the reporting features

The ability to receive an and analysis is half the reason to use a futures trading system in the first place. First, make sure you can easily access basics information on the futures. That alone isn't enough, though. You should also be able to view more complex reports like chart patterns and Fibonacci retraces.

Consider the maximum drawdown

Some trading systems advertise excellent profits over a period of several years, but avoid mentioning that their drawdowns may be more than the initial capital invested and could last for longer than a year. Before you settle on a system, take a close look at both the dollar amount of the drawdown and how long it may last.

Steer clear of "curve fitted" systems

A curve fitted trading system is one that's adjusted to fit recent past market data. The problem is these systems have never been traded to show they actually work. They're usually based on short-term, one-off trends that may not be accurate for predicting future trends.

Read the reviews

As with any other important purchase, it helps to check out how satisfied current users are with the trading system you're considering. It will also let you know about any quirks in the system that may not be mentioned in the advertising. Consider not only the trading system itself, but issues concerning the company that created it, such as any extra services they provide and customer support.

Look for a system that's easy to use

If the system you choose is so complex it gives you a headache every time you try to use it, it won't be much good to you no matter how accurate the data it provides. Ideally, you want a system that's completely intuitive. One good way to assess this is to try out the demo version and see how well you can use it without reading up too much on it first. If you find yourself having to look at the instructions just to perform basic operations, you should probably look for another system.

Most quality trading systems allow you offer you a free downloadable trial even an online demo you can work with for a while to see how well the system meets your needs. Remember, though, everyone's preferences are a little different, so look for a futures trading system that works for you, not just one that gets good reviews.Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com]]> Are Futures Riskier Than Options http://www.artwoo.com/article/are-futures-riskier-than-options http://www.artwoo.com/article/are-futures-riskier-than-options#comments Tue, 16 Sep 2008 05:50:25 +0000 double edged swordderivatives tradingstock futuresfutures and optionsstock movederivative tradingoptions market http://www.artwoo.com/article/are-futures-riskier-than-options derivative trading is risky. Period.

Derivatives such as are leverage instruments and by virtue of being leverage instruments, derivatives inherently carry more risk and exposure than pure and simple stock trading. Leverage instruments are risky because leverage allows you to do more with the same amount of money than you would normally be able to. Yes, leverage instruments such as futures and options have the potential to generate over 10 times more profit on the same move on the price of a stock than just buying the stock itself.

What most beginners to do not take into consideration is the fact that leverage is a . Just as it could help you generate over 10 times more profits on the same move, it could also incur as much losses should the against your favor. This is also why many beginners to futures or options trading lose their shirts so quickly and go broke.

So, why is futures and options trading still so popular then?

Very simply, most beginners with only a small fund and wants to build up a significant fund quickly could not depend on simple stock trading for a start. They need more leverage and they can afford to take more risk since the amount at stake is usually pretty small. With this in mind, the only question that remains is, which is safer for beginners? Futures or Options?

To determine which is riskier, we need to ascertain certain the qualities that constitutes "Risk". For derivative instruments, the main qualities that constitute trading risk are: Leverage, Liability, Liquidity and Versatility (fulfillment obligation is usually not a concern in trading as traders rarely hold till expiration).

Liquidity in the and stock is definitely lower than the stocks themselves but is enough for the trading purpose of retail beginners and shall be excluded in this discussion.

Leverage

Leverage of futures and options is the multiplication effect on your money versus buying the underlying stock itself. We shall not go into detailed discussion on how leverage is being calculated for futures and options here. It suffices to know that the higher the leverage, the higher your potential profits and losses becomes. Leverage in futures is a lot higher than the leverage in stock options due to the much higher lot size and low margin requirement. This makes futures trading riskier than options trading in terms of potential losses due to leverage.

Find out how leverage is calculated in options trading at http://www.optiontradingpedia.com/options_leverage.htm .

Liability

Liability here means the maximum amount of loss you bear when things go wrong. Yes, we all make wrong investment decisions all the time and derivative trading is no exception. When you buy stock options, the maximum loss you can sustain is the amount of money you used in purchasing those stock options. When things go wrong, those stock options become worthless and you can lose no more than that. However, in futures trading, you are exposed to unlimited liability and will be made to top up your trading account with the daily loss amount in what is called a "Margin Call". As long as your position continues to go south, you continue to top up your losses until you go broke or the stock gets to the bottom. Either way, you could have lost all your fortune in one go. That risk along with the fact that you have higher leverage in futures trading makes futures trading a lot riskier than options trading.

Versatility

Versatility here refers to the ability to profit in more than one direction. Logic says that if you can profit in more than one direction, risk is much lower than when you can only profit in one direction, right? Yes, stock options trading is highly versatile as there are options strategies that can be created to profit from 2 or more directions! Futures trading is basically single directional. You are either the short or the long. Never both, unless used in combination with the underlying stock, which increases capital requirement and defeats the purpose of leverage.

Get a full list of Options Strategies at http://www.optiontradingpedia.com/options_strategy_library.htm .

In conclusion, futures trading is riskier than options trading for the retail beginner to derivatives trading because of higher leverage, unlimited liability and lower versatility. This is also why options trading is slowly taking over as the derivative instrument of choice for the beginner derivatives trader. To learn all about options trading, please visit http://www.optiontradingpedia.com .Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management ( MastersoEquity.com ) and author of OptionTradingPedia.com . He is a fund manager specializing in options trading and his revolutionary Star Trading System has helped thousands.]]>