Apart from professional traders and speculators, futures trading is done by most of the people like you and me who are interested in making money in the markets. Like stocks, Buy low and sell high, is the basic premise in futures trading as well.
What is different in futures trading from stock trading? The fact that you can trade futures with leverage on either long or the small positions introduces an additional element of risk not present in the stock market.
Another major difference that you need to know between futures trading and stock trading is that there is no uptick rule in futures trading. This means that you can easily enter into a position to capture a downward go in prices with no restriction unlike that in the stock market where you cannot small every stock. Thus, it is as simple to sell small as it is to buy long.
How do you manage to survive at futures trading even when you are not particularly excellent at it? How do you become excellent at futures trading? The answer is simple. You should have the money first to open a margin account. Then you should have the ability to develop a trading plot that enables you to keep making money in the market long enough to capitalize your next huge go.
In simple words, it means if you dont have enough money, you wont be able to trade futures. And if you dont have a excellent trading plot, you wont last long in the market. Your money will quickly disappear.
$5,000 is the minimum with which you can start trading futures. But, in my opinion you need to have at least $25,000 in your account in order to start trading futures. You must know this thing that only 5% of the futures traders succeed and 95% of the people trading futures lose money consistently.
Make sure that you know the risks involved and that you go into trading futures contracts with realistic expectations when you start trading futures. If you are not sure how to handle the risk involved in futures trading, you can take advantage of the managed futures accounts.
So in order to trade futures, you need money, patience, knowledge and technology to be successful. Without money you cant open a position and without knowledge you wont know when to enter and when to exit. Trading futures contracts is truly a hybrid that uses both fundamental and technical analysis. Only proceed ahead if you have these skills in abundance.
The fundamental side of futures trading involves getting to know the industry in which you are making trades and the futures contract specifications and seasonal tendencies of the markets. You should also know the vital report that you need to keep an eye on.
You should determine your trading style. Are you are scalper? Are you a day trader? Are you a swing trader or are you a position trader? You will need to develop your own trading style whether it is momentum trading, scalping, day trading or swing trading. Your personality will determine your trading style. Now, the technical side of futures trading tells you what the market will do in response to the fundamentals.
Once you know your trading goals, establish a trading plot 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.
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading futures and currencies. Trade Dow Futures and S&P Futures!