Start Trading In Futures And Stop Losing Money in Stocks

Trading in futures is a type of investment which entails speculating on the price of a commodity increasing or decreasing in the future. In this kind of trading, it is rare that the traders have the real commodity because it mainly deals with intangible commodities. Futures traders deal with just a piece of paper that is known as a futures contract.

Futures trading is therefore the trading of futures contracts which lets particular stocks indexes, assets or commodities to be traded at a preset price in future. When trading in futures, the first step is to buy a contract which will have a specified lot size of index shares depending on the stock index. The lot size of futures varies with the type of contract.

Having bought the futures contract you are not expected to pay the entire value of the contract but rather just the margin. The margin too is determined by what the futures exchange sets for that particular day. It is worth noting that both parties in a futures contract must meet the terms of the contract on the delivery date. The seller delivers the underlying assets to the buyer or if it was a cash contract the money is transferred from the trader who made a loss to the trader who made a profit.

There are two major types of futures traders: hedgers and speculators. A hedger is the producer of the commodity being traded and trades a futures contract to safeguard himself from future price fluctuations. Speculators on the other hand include private investors and floor traders. Speculators invest in futures by buying commodities at a low price and selling them at a high price.

There are several benefits of trading in futures over trading in stocks.
One of the main benefits is that futures traders have a chance to do pre-market trading thereby getting a big head start on gaining profit that day. Stock traders do not enjoy that privilege because they can not trade until the market opens. Secondly, trading in futures has a significant contribution on risk management in an investor’s portfolio with potential tax benefits. The capacity to hedge a particular stock index allows you to hold onto the underlying position in the stock market for a longer time thus, potentially providing you with considerable tax savings in the longer term. Commission savings is also an advantage in the sense that the transaction cost in trading in futures amounts to much less than buying or selling the same number of shares of stock in the stock market.

For stocks, margins are determined by the Federal Reserve Regulation which means an investor buying on margin borrows the difference. He can either pay down the loan or compensate when the security is sold. In futures trading, margins are set by the exchange, but they do not represent a down payment on an asset and are quite low.

You also benefit from spread differentials, that is, if you feel that the commodity price will decline or rise in relation to another correlated commodity, you can buy a futures contract on one commodity and sell it on another hoping to profit from the spread differential between the two commodities.

Trading in futures also allows you to trade across borders without going through foreign clearing systems. This means that futures transactions will be clear of costs of accessing settlement systems across international borders.

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Emini Futures Trading Explained

The Emini futures is basically an electronically traded futures. This was started in September 1997 to attract the investors who were not trading into trading index futures. Emini S & P futures is based on the S & P 500 index. According to S & P 500 futures for every one point, $50 is gained or lost.

Trading Emini futures is based on the foremost market averages and indexes such as the Dow Jones Industrial Average, the S&P 500, the Nasdaq 100 and the Russell 2000. These indexes are widely followed and commented on by dealers from the worldwide.

Emini futures offer great chance for variety of traders. A lower margin is one of the many reasons why traders are turning to this system. There are innumerable advantages of this form of trading. Showcased underneath are some of the few reasons of choosing this easy and safe method of trading over anything else:

Due to lower margins, day trading this financial instrument has become popular with average retail traders. It is great for those who open and close their positions over the course of a single session. It has an edge over those day trading stock. The margin considered is only 1/5 th margin of the actual position.

Leverage is an attraction of traders to futures. Undoubtedly leverage is the tool that talented traders use to make real fortunes.

Advantages Over Stocks

There is always confusion when one need to choose between two identical stock trading opportunities. In Emini futures the whole world is a market and with whatever you have chosen, the index futures represent the entire stock market.

With a robust Emini futures system, the new futures traders minimize the risks of diversification and hedging. Also it helps to minimize the number of decisions he makes and provides maximum coverage of the stock markets.

Trading this using the computerized technique of trading is easy, safe and straightforward as compared to trading stocks. Following a handful of stocks means trading a portfolio of 15 to 20 stocks.

A huge part of realizing what is working for an individual is by trading on Emini futures before moving on to the standard contracts that involves greater money.

Emini index futures is well-organized with averages, stochastic, trend lines, Fibonacci retracement, short-term cycles and similar technical tools. It is also a tool for the discretionary traders to trade their opinions on news say Federal Reserve Board announcements, typical end-of-month bullishness among stock money managers, or other event-driven phenomena.

This electronic scheme offers great earning opportunity in gain as well as loss. Trading Emini futures has advantages over open-cry trading and have exponentially higher advantages if looked on an intraday basis.

Its growing popularity means that there are far more resources to acquaint traders

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