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Category: Futures Trading

Futures trading is done by two main parties, one of which is the hedger and the other one is the speculator. Where a speculator is there to trade for either their own accounts or that of their clients, a hedger always uses futures as a possible protection from losses. Hedgers can also be described as individuals or business owners who are more risk averse. Speculators and hedgers are likely to benefit from futures trading if the trader has a strong ability to analyze the markets and understands that future behavior. Though futures can behigh risk, they offer an equally high return and are thus very tempting.

In case you are new to futures trading you need to understand how things work. We at Cannon Trading are there to help with your understanding of all the elements of futures trading and also counsel and advise you with the same. Our knowledge base featured on our website, is a store house of information. In order to know every aspect of futures trading, you must read through these articles that have been listed in this category archive. Go through it and get better informed!

Important Factors When Choosing a Futures Broker

Posted on by Ilan

Choosing a Futures Broker can be somewhat of a daunting task. Most popular factors I see considered: cost, customer service, experience and knowledge. Going through the process of one’s own due diligence of researching your broker’s firm, trying a futures platform and comparing costs is a process one must take to find a broker that fits him or her.

Being a broker myself, I hear many concerns about cost before I even here about the type of future trading platform one would like to be set up with that fit his or her trading style. Please note cost should not be all when choosing a futures broker. Most reasonable and competitive commission quotes, for example the mini S&P cost less than half a tick. Unless you are trading high volume, less than half a tick should not hurt your account balance per round turn. When you look for “deep discount” commodity brokers, these brokers may provide you with an appealing commission cost but they may lack quality service and or even knowledge of the futures/commodities markets. This happens countless times in the industry; where clients will sacrifice service and knowledge of a broker for fifty cents less in commission because a lower commission cost seems to be more important for a client. Please be aware commission costs are only one ingredient of choosing a broker when trading futures.

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Futures Trading Levels

A more important component, I believe to be than cost when choosing a futures broker is customer service. Always note how long it takes your broker to respond for example to an email you send him or her. Does your broker respond in a timely manner? If your request was urgent did he/she give you the attention that’s required to solve the issue? These are very important factors one must consider when choosing a broker. If you, the client, end up with a commodities broker who is non responsive and not willing to help when the time is needed, there will be no value in you having a broker.

Look for the added values your broker can provide to help increase your success in futures trading, such as experience and knowledge. In my opinion, a great futures broker wants their clients to be successful in futures trading. Never be afraid to use your broker to pick his or her brain about the futures markets you are trading; go over strategies that you are using but may not be working for you. You choose your broker for a reason and your broker’s job is to service your futures account; be able to help you with your trading platform and every so often give his or her opinion of the markets you are trading if it’s asked by the client. In many “deep discount” firms, brokers seem to lack this type of service. I have seen many times where the client is left to figure out the platform themselves and are trading blindly because they lack direction from a licensed broker.

Although I agree that cost is a large component when choosing a broker, always consider the other factors such as customer service, knowledge and experience. Because if a broker lacks those three qualities but can provide you only cost, you may see your account having a shorter life span in the futures markets.

SPECIAL NOTE: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

A Quick History of U.S. Futures Trading

Posted on by Ilan

Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. These contracts are used to transfer risk between different parties. Futures markets originated as a way for producers to stabilize their income and/or raw material supply amid market fluctuations, but it soon grew into a way for speculators to bet on the direction of a given commodity. These two market forces interact to create the futures markets that we know today and each plays a critical role in the market’s dynamics.

Forward contracts vs. Futures contracts

Before the North American futures market originated some 150 years ago, farmers would grow their crops and then bring them to market in the hope of selling their inventory. But without any indication of demand, supply often exceeded what was needed and unpurchased crops were left to rot in the streets! Conversely, when a given commodity – wheat, for instance – was out of season, the goods made from it became very expensive because the crop was no longer available.

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Futures Trading Levels

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Erratic Price Fluctuations in Crude Oil and Rising Options Volatility

Posted on by Ilan

Crude oil futures have traded between $102 and $109 per barrel within the last few weeks (7/19 to 8/9 2013), touching both extremes twice within that period of time. Thursday’s (8/8) 3-week low of 102.24 on the September futures contract was followed by a surge up to a 105.92 high late that day and into Friday, a 3.5% rebound.

As a direct result, crude options volatility for at-the-money options expiring in September, a measure of expected price swings in crude oil and a gauge of options value, also increased.

This market move is a great opportunity to discuss option volatility. Change in options volatility is an important component when calculating an option’s value and can shed light on possible options trading strategies to implement. When you look at option prices and consider certain strategies, knowing whether an option or set of options are “over priced” or “under priced” due to high or low options volatility affords useful information as to whether you should be selling options or buying them.

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Planning Ahead Trading Futures

Posted on by Ilan

The following was written by Kimberly Pabillon, a Commodity Broker with Cannon Trading since 2009

Trading futures requires research of particular markets (planning ahead and analyzing market behavior), a well thought out strategy when it comes to trading a particular futures market, and finding the right futures trading platform that allows you to execute your trading strategy. There is no Holy Grail or one right answer when it comes to trading futures.  Many new traders think that trading in and out of the market for a one or two tick profit target will make them a large sum of money. And that’s definitely not the case. Futures markets can hold some what unpredictable terms when trading.

Before new and old traders take the dive into futures trading, traders want to make sure that they have done their research about the particular futures markets they are looking to trade. Keeping a daily journal of market behavior of a particular futures market can be very helpful when coming up with a trading strategy. Analyzing how a particular market behaves when certain reports are released and taking note can help a trader see market reaction with particular reports and numbers. You may also see a future trader’s chart littered with many studies. This can be distracting to many traders. Find a few studies that work well with your strategy and stick with those instead of adding studies you hear about from educators or other traders alike. No trader needs the extra noise on their chart if it’s not applicable to their trading strategy.

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Which Futures Market is Right for You?

Posted on by Ilan

So you got a taste of the markets and trading and now you are getting more involved, excited and looking to progress. Many questions ahead for you as a trader and as time progresses you will evolve and find out if trading is suitable for you and if so what type of trading, what type of risk capital and other questions that will come up. Many of these will appear as you progress and your knowledge increase. Some of these questions need to be answered before you start trading.

  1. How much risk capital do I have?
  2. What markets do I want to trade?

The answer to question 1 will vary for each trader based on their financial situation but the bottom line is, make sure you trade with money you can afford to lose.

The answer to question 2 has a few levels: First is what asset class are you looking to trade? Stocks/equities? perhaps FOREX or maybe futures? Since my area of expertise is futures, commodities and future options I would like to expand on this asset class.

Trading futures offers many advantages as well as some drawbacks. For many traders who prefer to day trade ( you enter and exit the position during the same session and avoid holding positions from one day to another), trading futures is a great alternative to day trading stocks. In stocks you need to have minimum of $25,000 to day-trade. In futures you only need $2500. The build in leverage in the futures market, intensified by the even more so reduced day trading margins, creates a double edge sword: Small moves can translate into big wins in your pocket BUT small moves against you will also translate into big losses in your account….

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How Do I Get Started Trading Futures?

Posted on by Ilan

So you’ve come this far. You’ve evaluated different vehicles of investment, and you have decided to expand your portfolio to include commodity futures. Now what? You are going to need a few tools at your disposal: a knowledgeable commodity broker that is quick on their feet, a reliable, efficient platform that will get you the information you require and executes your trades on a timely basis, and perhaps most importantly a plan.

Let’s begin with the most important requirement: because futures are so highly, there’s no doubt it can be a very risky asset class and you should only be trading with “risk capital”, or money that you can stand to lose and won’t affect your lifestyle if you do. Once you’ve accumulated your risk capital and you’ve come to terms with the nature of trading futures, you can take matters a step further by doing research on what kind of trader you want to be.

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Entering into Futures Trading

Posted on by Ilan

Futures trading can be a rewarding investment for those with an in-depth understanding of a particular commodity. In essence, you will be buying or selling a commodity based on its future selling price. For example, if you can buy a futures contract at a low rate and sell it for a higher price, it’s possible to gain a significant profit in the transaction. But before wading into this highly speculative market, there are some things you will need to do and know about trading futures markets.

First, you will need to enter an agreement and create an account with a commodities broker. These brokers are licensed professionals who are allowed to trade in commodities on the trading floor of an exchange. Accordingly, they manage and mediate futures trading between buyers and sellers as well as keep track of the prices of futures contracts. Because of their knowledge of the market, they can help you make sound investments and recommend an investment strategy that suits your profile.

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Futures Trading Levels and Economic Reports for May 16, 2013

Posted on by Ilan

Connect with Us! Use Our Futures Trading Levels and Economic Reports RSS Feed.

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1. Market Commentary
2. Futures Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
3. Commodities Support and Resistance Levels – Gold, Euro, Crude Oil, T-Bonds
4. Commodities Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Futures Economic Reports for Thursday May 16, 2013

Hello Traders,

For 2013 I would like to wish all of you discipline and patience in your trading! 

 

We saw good volume across different markets today including better volume in the SP 500 than we saw in a while.
The most meaningful move in my opinion was in silver and gold and a daily chart of the gold market is below for your review:

Continue reading “Futures Trading Levels and Economic Reports for May 16, 2013”

Trading Levels and Reports for December 20, 2012

Posted on by Ilan

 

Jump to a section in this post:

1. Market Commentary
2. Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
3. Support and Resistance Levels – Gold, Euro, Crude Oil, T-Bonds
4. Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Economic Reports for Thursday December 20, 2012

 

Hello Traders,

Action today on the SP500 is somewhat bearish to me. Good volume (especially for pre holiday trading), we made fresh high (recent highs) and turned around to close at the lows. To me that shows that there is good selling interest at the 1444 area and possible move down to 1412.

Great resource was just added to our website!
An interactive trading calendar, which includes reports, economic numbers, last trading days, option expiration and much more!
Bookmark this page and use it!

Happy Holidays!

Futures Trading Levels and Reports for August 30, 2012

Posted on by Ilan

Jump to a section in this post:

1. Market Commentary
2. Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
3. Support and Resistance Levels – Gold, Euro, Crude Oil, T-Bonds
4. Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Economic Reports for Thursday August 30, 2012

 

Hello Traders,

One Way to Eliminate Fear and Greed While Day Trading

Disclaimer

The methods described in this article are for educational purposes only. Past results are not necessarily indicative of future results. The author and the publisher assume no responsibility for your trading results. Trading involves a high degree of risk. No recommendation is being made to buy any stock, commodity, option or other financial instrument. Consult your financial advisor before starting any investment system.

 

It is a known fact that fear and greed can be a trader’s worst enemies.

I’ve found one way that has helped some clients deal with fear and greed and their cousin, “getting out of winners too soon and staying in losers too long.”

What is it? Entering Multiple Contracts: Philosophy

In order to enter multiple contracts while day trading, one has to have the appropriate risk capital and margin requirements. But the advantage of trading more than one “unit” or splitting your trading size into two or more parts is as such:

If you enter a trade with one contract (or if you are treating your trading size as one unit, meaning you enter a trade with 4 contracts and exit the trade with 4 contracts), you can face a very quick dilemma, especially when day-trading. Consider the two following scenarios:

  1. You get in and very quickly you are up 2 mini SP points…what do you do? Do you take profit? Bring your stop loss closer? How do you avoid getting out too early or too late?
  2. You enter a trade and it goes against you rather quickly…if you get out then it is a loser…but the little voice in your head says “what if the market goes back up?”

In the first case scenario, when market decided to be nice to us and moved in our direction, I like to exit half of my positions relatively quickly. In the case of the mini SP, this would be around 7 ticks profit.

What I’ve found is that this will allow me to manage the rest of the trade in a much more relaxed manner. Since I’ve already locked profits in, now I can look for a proper stop close to my break-even level. I can analyze my next target more realistically and, if the market provides room for additional gains, be there to participate.

Continue reading “Futures Trading Levels and Reports for August 30, 2012”

RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.