Join        Login             Stock Quote

Frequently Asked Questions About Trading Futures and Options

 August 09, 2007 12:17 AM

 What is the biggest mistake made by many futures traders?
The biggest mistake that most traders make, especially new traders, is trading too much with too little capital. There are sound mathematical reasons to expect such trading activity to ultimately result in loss and, in fact, this has been confirmed by numerous reports and surveys within the industry: most traders starting out with $5,000 or less tend to lose their money within the first six months of trading. The key to successful trading is to gauge your trading activity based upon your capital, and allow plenty of cushion in the form of excess margin for unexpected price movements.

[Related -Oil Prices Stubbornly Resilient Around $50 a Barrel.]

Is it possible to make really big profits trading futures?
Yes, it is, but keep this in mind. There is a relationship between risk and return that has shown to hold over time, namely, that higher returns are often associated with higher risk. So while it is possible to make big profits trading futures, the trader is also exposed to considerable risk - risk of losing money. Beginning traders are probably better off "lowering their sights" a little and, consequently, playing it more safe.
commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
What exactly is leverage?
Leverage is a measure of the market value of your futures position relative to the amount of your trading capital. The greater the degree of leverage, the more futures value you control relative to your capital. Futures contracts, in themselves, are highly leveraged instruments: a little bit of money controls a lot of futures value. For example, some futures can be bought or sold for as little as two percent of the market value of the futures required as margin. It is leverage that enables tremendous profit or loss to be made relative to your trading capital. High-leveraged trading implies that you are using almost all of your available capital to meet margin requirements, and entails considerable risk as it can result in significant gains or significant losses. Low-leverage trading implies that you have plenty of excess capital in your account to cover unexpected price movements, and is consequently less risky.

Next Page >>12

What are Commodity Trading Advisors? Futures and Options Exchanges
iOnTheMarket Premium


7/30/2009 10:08:23 AM
by Khalid
how to devote futures P/L in case of trading in the market with a small capital?

Rating: (3) (0)

Comments Closed

rss feed

Latest Stories

article imageOil Prices Stubbornly Resilient Around $50 a Barrel.

The majority opinion seems to be that oil prices will drop further, popular targets being $30 and $40, with read on...

article imageADP: US February Payrolls Continue To Grow, But At Slower Rate

Payrolls at US companies posted another respectable gain in February, advancing 212,000 over the previous read on...

article imageAre You Prepared For Negative Interest Rates?

Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few read on...

article imageGreek Problems Born from Socialism

Our weekly commentaries provide Euro Pacific Capital's latest thinking on developments in the global read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.