Trading Advice & Trading Tips About How to Trade The Futures Markets to Achieve Trader Profits
Today's date is a day to start trading the markets for profit. Commodity futures trading refers to the trading of futures markets contracts. These contracts are to trade commodities markets at fixed prices in the future. The commodity price is based on the existing or prevailing market quotes.
Commodity futures and Forex market trading is similar to stock market trading in some ways however there's a much higher risk/reward ratio due to a combination of market volatility and high leverage where a contract allows you to control a significant size market position, using comparatively low commodity broker account equity and margin requirements.
Commodity futures are traded at a number of US and international exchanges, with worldwide trading rapidly increasing. Consider working with a "Commodity Trading Advisor" aka CTA, to help you trade the futures markets successfully. Then you can start "running running" on the way to profitable trades instead of mostly "running running" away from losing trades!
Over the years there's been a major increase in the number of commodity traders trading futures contracts because of many reasons. The reasons include the following:
- simplicity of trading that enables anyone to do trading online or virtually
- the present of high liquidity in the market due to huge trade volumes made daily
- the stability of the market
- easiness to own an underlying commodity wherein one can buy a high-priced product at a lower price during the time of agreement
- low rates of commission in comparison to trading underlying futures stocks
- the ability to do trading at home with decreased in working capital
- lower initial investment required
- the availability of small futures that have narrow spreads and less account minimums
- the presence of various underlying products in the market
Many traders can be basically successful in getting trading profits via commodity futures trading. At the futures markets, the speculators and the hedgers meet to predict whether the price of a commodity will rise or fall in the future based on a particular market or currency index. Just like any trading market, commodity futures and forex trading is risky, however there's potential to get long and short term profits which may be considerable.
There are different futures markets as well as strategies that a person can use to gain trader profits from commodity futures trading. Primarily, a commodity refers to the physical product whose value is decided by the forces of demand and supply. These forces include precious metals, energy, grains, and more. The commodities are traded in a centralized market at a predetermined time whether its price will rise or fall. In trading commodities, it would be strategic to use straddles. A straddle is created holding the same number of puts and calls with the same expiration date and strike price. The “calls” is where the trader expects that the price will rise while the “puts” is where the trader speculates that the prices will fall.
This is because; you do not know when the price will move against you. It will be disheartening if all your futures contract market moves against you. You need to use a trailing stop to maximize profits on remaining positions. Good commodity trading trends can last for long but also you should remember that they do not last forever.
One more commonly used trading strategy in gaining trader profits from commodity futures or forex trading is scalping. Just like commodities futures, the prices of forex and currencies and the price quotes for scalping purposes are based on the rise or fall of currency values. In the value of currency, the scalpers try to take mostly small short-term profits off the incremental modifications. As this is done repetitively, the profits will continue to grow in time resulting to significant total profits as all small profits are combined. In able to continue gaining trader profits, one must require strict discipline in order to continue making shorter-term and small profits while preventing too-large trading losses.
In the commodity futures markets, there are two main types of futures trading agreements available. The first type is called as commodity futures and requires physical delivery. The futures in this type include agricultural commodities. The second type is called as financial futures, which often require cash settlement. This type involves mutual funds, bonds, treasury notes, and the like.
Trading Advice and Tips About How to Trade
Commodity Options for Profitable Options Trades
Trade commodity options are highly profitable. It can be more wonderful and great than stocks options because it brings risk management to an entirely new level and gives plenty of flexibility as well. Compared to index or stock options, strategies for trade commodity options can be exchanged with lesser margin. These options can also be used for both speculative and income purposes. Moreover, the margin rules of SPAN allow usage of less capital for trade commodity options. Nowadays, the commodity option trading are made substantial for complicated options trading strategies with the help of a good discount commodity broker who uses deep discount commissions, online trading platforms, electronic trading platforms and electronically traded mini contracts.
Commodity options are just like stock options trading when it comes to the trade transaction. The only difference between these two is multiples of option premiums that each represents. Apparently, there are different advantages gained from commodity options that include low margins & high yields, lower commissions, low slippage, better hedging, no additional margin trades, call credit spread, and additional trades.
Most of the trading in commodity options use the SPAN margin rules wherein the calculation is centered on all angles of a selection. This can be very advantageous to the traders. For instance, a trade that uses collar strategy will have lower margin compared to the same trade that uses indices or stocks directly. Lower margins will result to better utilization of capital as well as with higher profits.
When trading commodity options, the slippage per trade can be substantial. However, in most cases an option that involves the same currency size will result in lower slippage. The slippage is even lesser with commodity options that are electronically traded like e-mini contracts and gold options. Most of the strategies with trade commodity options need some few adjustments or hedging during the span of a trade. The general rule for hedging or adjustment is going short or long of the principal to watch over if the principal is not in favor of the trade. E-mini contracts and futures provide the best method to hedge or adjust with low capital requirement.
Trading commodity options do not always need extra margin. With careful assessment of the current trades, possible extra trade opportunities may arise. These additional opportunities can decrease the overall margin that the trade requires.
Apart from the above mentioned advantages of trading commodity options, the trader must be aware trading options as well as futures involve considerable risks of loss or gain that maybe or not suitable for all traders. Here is a useful list of tips that one can use for profitable options trades:
- Follow the trends in the commodity market as well as your natural instincts. As soon as you have chosen your trading system, stick to it.
- Do not overtrade and apply techniques of money management on your trading.
- Secure a position in the market wherein your profit goal exists.
- Avoid trading markets that has low capital and with volatile contracts.
- Establish trading plans prior to market opening. The plans must include objectives, exit points, and entry points.
- Maintain discipline by using technical signals such as charts. This will eliminate impulse trading.
- Cut losses short so profits can run.
- Do not overstay on a good market because there is a tendency to overstay on bad markets as well.
- Learn to trade from the short side and be patient.
- The broker, Commodity Trading Advisor and client should have good rapport.
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