General Info on Futures Trading
The
futures market is huge in that at any given time there are
several markets that are in full bullish phase, others in a
bearish phase, others trending sideways, others bottoming
and finally some in the topping process. This means that
once you have the right tools it’s a lot easier to find
potentially new trades in these markets simply because there
are so many of them. Equities for the most part trend in
the same direction. Yes here and there you have spots of
strengths but one has to find these strong sectors and then
look for strong plays in within those sectors. With the
futures markets one can simply skim across the different
segments and immediately spot potentially new buys or sells.
The great thing about the futures markets are that if you
want to be a perpetual bull or bear you have the chance
because all these markets work independently of each other
for the most part; hence all one has to do is look and wait
for the right time to enter. For example you could be a
bull and just have played the following markets one after
the other in the last 15 months. The US dollar, then oats,
then corn, then wheat, then oil, natural gas, cocoa, cotton,
coffee etc and you would never have to be a bear. You could
in effect do this indefinitely as there are so many markets
to play. For example right now certain markets are pulling
back and will soon start bottoming and thus provide bulls
with new entry points once the current one’s they are
playing run out of steam. Examples are feeder cattle, lean
hogs, copper, oil, etc.
This does
not mean that the equities markets are not worth playing;
indeed nothing could be further from the truth.
Incredible gains have been made and stand to be made
from the equities sector. What we are simply stating is
that once you are disciplined and have adjusted to the
volatility of the futures markets they are in some degree
easier to analyse because you are looking at the same
markets again and again and this then provides one with the
ability to develop an intuitive sense of direction. When you
examine corn it’s the same market that you are looking at
again and again; the same goes for cocoa, cotton, gold
etc. However with equities first you need to identity the
sector then look for plays and a stock that’s good today
might not necessarily be good tomorrow. Hence one you
master the two most important factors of trading which are
discipline and patience the futures markets do indeed
provide one with the ability of developing what we would
like to call an intuitive feel that for the most part is
lacking when on examines stocks. In the equity sector this
is reduced to indices and as of recently one can apply this
to ETF’s however not all of them have sufficient data. Since
most traders cannot master these two very important
components of trading they can never enter the futures arena
and if they do they usually get killed immediately. Even
when you are a disciplined trader you have to understand how
to incorporate these skills into the futures markets and not
simply assume that the methods you used in the equities
markets will work. For example one of the main adjustments
you have to make is to accept that these markets are very
volatile and also you have to train yourself to deal with
this huge volatility. Traders that do not adjust for this
will simply get killed here. Hence being a disciplined and
patient trader in the equities markets does not mean you
will succeed here; in reality most fail because they have
not adjusted their skills to take into consideration the
very different nature of the futures markets.
In no
other market are your skills of endurance tested as much as
they are here. Beginners should focus on the markets where
the margin requirements are lower and where the draw downs
are less. Hence avoid natural gas, Palladium and to some
degree the oil sectors. Oats, corn, wheat, cocoa, cotton,
coffee, sugar, orange juice, pork bellies, certain
currencies (look under margin requirements below for more
info) etc do not require huge margins plus the potential
draw downs are less and the risk to reward ratio in many
cases is actually higher then playing the very fast moving
natural gas sector. The natural gas markets are only for
experienced players who have the money to play in this
sector and who can deal with huge swings of up to 20k on
each side before the main move begins. If you cannot do this
then you must stay out of this market.
One of
the best ways to learn futures is to open up demo account
which enables you to trade in real time but without risking
the capital. Get a feel for the contracts and for the
markets and then slowly start to venture in the real world.
There is no rush as these markets are going no where so take
your time and make sure you understand how these markets
work.
Some Basic Resources
Futures contract and margin info
http://www.usafutures.com/vlpmargins.htm
Futures
expiration dates
http://www.farrdirect.com/expfut.htm
Places you can open a demo account
http://www.ibdirect.com/futures_accounts.html
http://www.1st-futures-broker.com/
Traders
looking for a site that provides futures contract info such
as symbols (for both the electronic and Pit markets),
contract specifications and various other info will find all
the relevant info in an easy to use format on this site
http://www.alaron.com/contract_specifications.aspx
Final note
Futures is not for everyone,
however should you decide to venture into this arena, then
consider our VIP service. To date we have never had a losing
year. For more details click on this link
VIP Futures Service
|