Open An Account
Free Demo Account Subscribe Here

Category: Uncategorized

How a Commodities Broker Can Help You Diversify Your Investment Portfolio

Posted on by Ilan

If you’re active in the stock market and know how to trade and sell to make money then your next step in getting the most out of companies and securities is to find a commodities broker to trade commodity contracts on your behalf, no matter how active traders are using commodity futures. You can find a broker to do the trading on your behalf or get access to trading platforms and advanced tools that let you become a commodity trader on your own. You can turn a profit out of any commodities markets when you have industry at your fingertips and you won’t have to pay massive exchange fees or increase your risk exposure.

If you go with a commodities broker, you’ll have the advantage of all the trading experience he or she has and they’ll ensure that your assets provide derivatives that make you money while they’re executing trades on your behalf. Suppose you prefer to carry out the business of futures trading and futures contracts on your own. In that case, you’ll have access to all exchanges through trading platforms built by experienced traders and investors. There’s no easier way to trade and make a profit in the market and commodities brokers from all over the industry will be there to help you make the right decisions.

Understanding Commodities and Commodity Brokers

To understand what a commodities broker does, you have to understand what a commodity is and it’s not difficult, once you understand that it’s a physical good, unlike stocks or bonds that most people trade. You can think of commodities as precious metals such as gold, energy like crude oil, and foods such as soybeans, corn, and grain. Each one of those has a price and you’ll typically be trading their futures, as opposed to trading the price of grain don’t the day you make the exchange.

People who trade commodities are well-versed in futures markets and have an idea of where the price of something will be on the day the trades are made in the future, meaning your trader is the best source of information on the market. For instance, you likely don’t know what will happen to gold on the London metal exchange. Hence, commodity brokers are best to negotiate commodity contracts on your behalf so you make the most profit off your investment. No matter how many trades you want to exchange with other investors, you’ll have a steady flow of derivatives that your commodity trader or commodities broker gets for you.

Key Characteristics of a Good Commodity Broker

Man Studying Graphs

There are a few things to look for in a good commodities broker or commodity trader and the first is that they have lots of educational trader material for their clients to check out so they know what the commodity broker is doing and they’re they’re doing it on their behalf. They should also let their clients make trades on their own without charging exorbitant fees that cut into their derivatives so much they struggle to make money off the markets. While trading commodities will come with fees, they should be fair so everyone from the trader to the brokers benefits from it.

Your commodities broker or trader should give you access to futures trading that you can’t get on your own so you find plenty of value in what they have to offer you while you make your way through the exchanges on their platform. Every trader should have access to educational material to learn what futures trading is and how futures commission merchants fit into the business before they decide to buy their first commodity. Commodities brokers should also be regulated by the National Futures Association, so you can be sure that all commodities and futures are being traded the way they’re supposed to be.

What to Look for in a Commodities Trading Platform

When you want to act as your own trader, instead of commodity brokers trading on your behalf, it’s just as important to check out any platform you’re considering to ensure they’re adhering to National Futures Association rules and that you’ll have access to all the trader information as a broker. It’s a very good idea to seek out a platform that offers the assistance of a commodity broker who doesn’t act as your trader but gives you advice on the futures to buy and sell. This is a well-rounded and balanced approach that leaves you in charge of the final trader decisions while the brokers simply offer you input.

The platform should also have plenty of graphs that you can use to follow the course of the commodity and make an informed guess on where it will be in the future when your trader moves are carried out in the markets. Any commodity broker will tell you that information is their main source of power and that’s what you need to get from the platform you choose to use. It’s the best way to know that your portfolio management choices are sound and that you’ll be making better choices for you than brokers would.

Security and Safety

Silver Bars

Finally, whether you choose to let a commodity broker be your trader, or if you’re making the decisions on your own, the platform you use should put your safety and security about everything else they have to offer you, especially since you’re dealing with your livelihood and the derivatives you’ve worked so hard to make. It doesn’t matter which commodity you want to invest in on the trader platform, your information should always be kept safe and secure on the site and your broker should always let you know exactly what’s happening with your capital.

It’s also important to have access to live trader and commodity news on the platform so you can make informed decisions about everything you choose to do as your own broker. The best commodity platform will have plenty of up-to-date information for you to study or glance at to know what’s happening and what’s coming in the market. Once you find a trader platform with all that, you’ll have everything you need to be the best broker you can be.

What to Watch for After a Fed Rate Cut: Market Reactions, Opportunities, and Risks

Posted on by Ilan
Get Real Time updates and more by joining our Private Facebook Group! Subscribe to our YouTube Channel Listen to our Market Recap Podcasts on Apple Podcasts
C79

What to look out for after a FED rate cut

September 23, 2024 by GalTrades.com Powel said at the Jackson hole meeting, “The time has come for policy to adjust,” The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.” It didn’t matter if we got a .25 or .50 basis point rate cut, earnings growth will determine if the market can keep going up. The market made new all-time highs, but only one MAG7 stock made new all-time high, META. That means the rally is broadening, a positive point for the market. The S&P is currently trading at a forward P/E of 21 which suggests that a lot has been priced regarding the bull thesis. Valuations are high and that should be noted. How much higher can the market go up? remains to be seen. “don’t fight the Fed” or “don’t fight the trend” are statements to sustain near-term bullish momentum. Aside from the FED cutting rates, the economy still appears to be on firm footing. Next week the earnings and economic calendar is relatively light, outside of next Friday’s PCE report, but perhaps this can be conducive for recent bullish momentum. In the absence of news, the path of least resistance is higher. Yes, we are still in the midst of bearish seasonality, but the technicals look encouraging. Going forward bad news is good news because the FED will need to lower rates on bad news, unless the news is disastrous. As long as the SPX can remain above July’s prior all-time closing high 5,667, we should see continuation. An SPX close below 5,667 could introduce concerns of a false breakout to all-time highs, which would likely introduce some additional selling pressure A positive point: 76% of the S&P 500 stocks are above there 50 Day Moving Averages and 76% are above their 200 Day MA. Year to date the two top performing factors were momentum and growth which were up 29/27 % respectively. The two worst preforming groups were yield and value stocks. In the last 3 month that flipped. Dividend and value stocks get an uptick when rates come down. I see analysts calling for the small caps to go up with rate cuts. The action on Wednesday didn’t show that. It may be wise to react as opposed to jumping in now. It would make more sense for mid-caps to go up prior to small caps as there are more profitable companies in mid-cap sectors. Statistics show post-election the markets usually end higher. And in the past when the FED has cut rates in a soft landing, or no landing markets ended up higher for the next 6 to 12 months almost 100% of the time. Cyclical, mortgage, auto loan rates and small cap stand to benefit from rate cuts. Rate cuts can ignite small caps and value stocks. The IJR index contains a higher % of companies which are profitable as opposed to the IWM Russell 2000. Bull market indicators usually benefit capital market plays, stocks such as; CBOE, IBKR, BLK, GS. Rate cuts should help the homebuilders XHB ETF. If Fed rate cuts can bring short-end bond yields down to more normal rates, then banks wouldn’t have to overcompensate at the long end and longer-term loans like mortgages could come down. That would put more money in the pockets of everyday Americans and help fuel all sectors of the stock market — not to mention the benefit lower rates have on valuations. Commodities and oil prices are down, rates are coming down. That’s all good for companies and the consumer.   Energy companies as opposed to the price of oil. historically this sector has been one of the best sectors going into a rate cut. What we didn’t have in the past is a slowdown in China, that narrative should put a lid on appreciation. There may be some individual names that are exceptions. FINISH ARTICLE HERE
stars
  c526dc71 5be3 43b9 a4b3 7a907d25e102  

Daily Levels for September 23, 2024

4d2695a3 014e 4935 a3b8 4639078d935a
  Economic Reports provided by: ForexFactory.com All times are Eastern Time ( New York)
350aad2c 3117 4fe0 9ca5 a4cbd69d892c

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572. Explore trading methods. Register Here
3b644da2 2bee 4d39 8d98 5208a20bec39
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Weekly Newsletter: Learn about Tick Size, Copper System, Sugar Chart + Trading Levels for Sept. 23rd

Posted on by Ilan
Get Real Time updates and more by joining our Private Facebook Group!
Subscribe to our YouTube Channel

C93

Cannon Futures Weekly Letter Issue # 1209

In this issue:

  • Important Notices – Heavy Fed Speaking, Active Data, Few Earnings
  • Futures 101 – Tick Size & Minimum Fluctuations
  • Hot Market of the Week – March Sugar
  • Broker’s Trading System of the Week – Copper Swing Trading System
  • Trading Levels for Next Week
  • Trading Reports for Next Week

 

Important Notices – Next Week Highlights:

 

The Week Ahead

Heavy Fed Speak Week, active data and a few earnings highlight the week ahead.

 

Light Earnings, by largest Market Cap

  • Wed, Micron Technologies After the close
  • Thursday, Accenture pre-open, Costco after the close

 

Fed Speak schedule

  • Mon. Goolsbee 9:15am CDT, Kashkari Noon CDT
  • Tues. Bowman 8:00am CDT
  • Wed. Kugler 3:00pm CDT
  • Thu. Collins 8:10amCDT, Powell 8:20am CDT, Williams 8:25 CDT, Treasury Sec. Yellen 10:15am CDT

 

Big Economic Data week:

  • Mon. S&P PMI Flash
  • Tues. Case-Shiller Home prices, CB Consumer Confidence, Redbook, Richmond Fed.
  • Wed. Building Permits, New Home Sales
  • Thur. Jobless Claims, Core PCE Final, GDP Final, Durable goods, Pending Home sales
  • Fri. Personal Income, Retail and Wholesale Inventories, Michigan consumer sentiment

 

How to Rollover on the E-Futures Platform video below

thumbnail?url=https%3A%2F%2Fi.vimeocdn

 

  • Futures 101: Tick Movements: Understanding How They Work

    Minimum Price Fluctuation

    All futures contracts have a minimum price fluctuation also known as a tick. Tick sizes are set by the exchange and vary by contract instrument.

    E-min S&P 500 tick

    For example, the tick size of an E-Mini S&P 500 Futures Contract is equal to one quarter of an index point. Since an index point is valued at $50 for the E-Mini S&P 500, a movement of one tick would be

    .25 x $50 = $12.50

    NYMEX WTI Crude Oil

    The tick size of the NYMEX WTI Crude Oil contract is equal to 1 cent and the WTI contract size is 1,000 barrels. Therefore, the value of a one tick move is $10.

    Summary

    Tick sizes are defined by the exchange and vary depending on the size of the financial instrument and requirements of the marketplace. Tick sizes are set to provide optimal liquidity and tight bid-ask spreads.

    The minimum price fluctuation for any CME Group contract can be found on the product specification pages.

 

 

stars

3b644da2 2bee 4d39 8d98 5208a20bec39

 

    • Hot Market of the Week – December Gold

    Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.

    FREE TRIAL AVAILABLE

    March 2025 Sugar

    March sugar has shifted its formation back to the topisde and activated upside PriceCount objectives in the process. The chart accelerated to its first upside count to the 21.85 area. It would be normal to get a near term reaction form theis level in the form of a consolidation or corrective trdae. IF you can sustain further strength, the second count projects a possible run to the 23.26 area.

     

    PriceCounts – Not about where we’ve been, but where we might be going next!

1e5f6ba4 5ab1 4978 9add 01c8cc561e77
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.

   Broker’s Trading System of the Week

With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.

Balance Cont. v.22

PRODUCT

HG – Copper
SYSTEM TYPE

Day Trading

 

Recommended Cannon Trading Starting Capital

$25,000.00

 

COST

USD 150 / monthly

Get Started

Learn More

86422252 8f48 4ff8 83d2 83943ca53099

The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
Yes
S
No
S

Daily Levels for September 23rd 2024

5f2ead23 5c67 4d34 94a9 f65f637a95b1

 

Trading Reports for Next Week

435212a9 6b73 4c73 a2f0 fcb1ef3233f7

bf9b3e0d 9c23 44e8 980c a8c01bfbe2cf

Trading Reports for Next Week

First Notice (FN), Last trading (LT) Days for the Week:
174942e6 4ea7 461f aa6d db529188220c

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Triple Witching Tomorrow: September Stock Index Futures Expire, Shift to December (ESZ24)

Posted on by Ilan

Get Real Time updates and more by joining our Private Facebook Group!

Subscribe to our YouTube Channel

Listen to our Market Recap Podcasts on Apple Podcasts

C62

TriPPPle witching tomorrow!

Stock Index September contracts (i.e., the E-mini and Micro S&P, Nasdaq, Dow Jones and Russell 2000.) expire Friday, Sept. 20th (8:30 A.M., Central Time). At that point, trading in these contracts halts. Stock index futures are CASH SETTLED contracts. If you hold any September futures contracts through 8:30 A.M., Central Time on Friday, they will be offset with the cash settlement price, as set by the exchange.

FRONT MONTH IS NOW DECEMBER , the symbol is Z24, example for mini SP is ESZ24

Plan your trade and trade your plan

stars

December Dollar Index

The December dollar broke down into a new low and came close enough to satisfy the third downside PriceCount objective. The chart is reacting with a corrective trade higher which is a normal response. IF you can resume the break with new sustained lows from here, we are left with the low percentage fourth count to aim for in the 97.00 area.

image 1

The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com

Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results. 

Daily Levels for September 20, 2024

image

Economic Reports

provided by: ForexFactory.com

All times are Eastern Time ( New York)

image 2

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Labor Day Modified trading Schedule, Bitcoin Outlook & Levels for Aug. 30th

Posted on by Ilan
Get Real Time updates and more by joining our Private Facebook Group!
Subscribe to our YouTube Channel
Listen to our Market Recap Podcasts on Apple Podcasts

 

C9

 

 

Please see below Labor Day trading Schedule.

Our blog will resume Tuesday afternoon and there will be no weekly newsletter tomorrow or blog Monday afternoon.

 

Labor-Day-2024-552x1024 image

 

stars

 

Daily Levels for August 30th, 2024

e9f58462 2047 4bba 85d0 ef3e9021bbce

2e9f5929 f59c 4593 8282 56f4cbb63e16

September Bitcoin

September Bitcoin peaked in the spring and to date has completed three downside PriceCount objectives off the March high. At this point, IF the chart can resume its break with new sustained lows, we are left with the low percentage fourth downside to aim for 41,294 area.
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com

 

Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.

 

Economic Reports
provided by: ForexFactory.com
All times are Eastern Time ( New York)
8fa35495 a319 4285 b94e 1cab92b25c03

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

S&P 500 Index Futures

Posted on by Ilan

What are S&P 500 Index Futures?

S&P 500 Index Futures are standardized contracts traded on futures exchanges that allow traders to speculate on the future value of the S&P 500 Index, a widely followed benchmark representing 500 of the largest publicly traded companies in the United States. These futures are among the most liquid and widely traded financial derivatives globally, making them a crucial tool for both hedgers and speculators in the financial markets.

S&P 500 Index Futures

The S&P 500 Index Futures, commonly referred to as SPX Index Futures, provide investors with a way to gain exposure to the overall U.S. equity market without needing to buy individual stocks. This contract derives its value from the S&P 500 Index, which tracks the performance of these large-cap companies. As such, SP500 Index Futures are not just popular among institutional investors but also among individual traders looking to capitalize on movements in the broader stock market.

Key Features of S&P 500 Index Futures Contracts

1. Contract Specifications
  • Underlying Asset: The underlying asset of an S&P 500 Index Future is the S&P 500 Index itself. The value of the contract is tied to the performance of this index.
  • Contract Size: The standard contract size for S&P 500 Index Futures is $250 multiplied by the value of the S&P 500 Index. For example, if the S&P 500 Index is trading at 4,000, the value of one futures contract would be $1,000,000 ($250 x 4,000).
  • E-mini Contracts: Due to the large size of the standard S&P 500 futures contract, E-mini S&P 500 futures were introduced. These contracts are one-fifth the size of the standard contract, with a value of $50 multiplied by the index. E-minis have become more popular due to their affordability and accessibility.
  • Tick Size: The minimum price movement, or tick size, for the standard S&P 500 futures contract is 0.25 index points, which equals $12.50 per contract. For E-mini contracts, the tick size is also 0.25 index points, but it equals $12.50 due to the smaller contract size.
  • Expiration: S&P 500 Index Futures have a quarterly expiration cycle, typically expiring in March, June, September, and December. The contracts are settled in cash, meaning there is no delivery of the underlying asset, just a cash payment based on the contract’s final settlement price.
2. S&P 500 Futures Trading – Trading Hours

S&P 500 Index Futures are traded on the Chicago Mercantile Exchange (CME) and are available for trading nearly 24 hours a day during the trading week. This extended trading period allows market participants to react to global events that occur outside of regular U.S. market hours, providing continuous opportunities for trading.

3. Leverage

One of the most significant advantages of trading S&P 500 Index Futures is the ability to use leverage. Leverage allows traders to control a large position with a relatively small amount of capital. However, while leverage can magnify profits, it can also amplify losses, making it a double-edged sword that requires careful risk management.

4. Margin Requirements

To trade S&P 500 Index Futures, traders must post a margin, which is a percentage of the contract’s total value. The initial margin is the amount required to open a position, while the maintenance margin is the minimum balance that must be maintained in the account to keep the position open. If the account balance falls below the maintenance margin, the trader must deposit additional funds to bring the balance back up to the required level.

5. Hedging and Speculation

S&P 500 Index Futures are used for both hedging and speculative purposes. Hedgers, such as institutional investors or portfolio managers, use these futures to protect against potential losses in their equity portfolios. For instance, if a portfolio manager anticipates a decline in the stock market, they can sell S&P 500 futures to offset potential losses in their holdings.

Speculators, on the other hand, use S&P 500 futures to profit from anticipated market movements. By taking a long or short position, speculators can capitalize on price changes in the S&P 500 Index without having to invest in the underlying stocks.

6. Settlement

S&P 500 Index Futures are cash-settled, meaning that at expiration, the contracts are settled based on the difference between the contract price and the final settlement price of the S&P 500 Index. Traders who hold positions until expiration will either receive or pay the difference in cash, depending on whether they were long or short on the contract.

Trading Strategies Using S&P 500 Index Futures

1. Directional Trading

Directional trading involves taking a position based on the expectation of a future price movement in the S&P 500 Index. If a trader believes the market will rise, they can buy (go long) S&P 500 Index Futures. Conversely, if they anticipate a decline, they can sell (go short) the futures contract. This strategy is straightforward but requires a strong understanding of market trends and economic indicators that can influence the index.

2. Hedging

Hedging with S&P 500 Index Futures is a common strategy for reducing the risk of adverse price movements in an equity portfolio. For example, a portfolio manager who holds a diversified portfolio of U.S. stocks can sell S&P 500 futures contracts to protect against a potential decline in the market. If the market does fall, the losses in the portfolio may be offset by gains in the futures position.

3. Spread Trading

Spread trading involves taking simultaneous long and short positions in related futures contracts to profit from the price difference between them. In the context of S&P 500 Index Futures, traders might engage in calendar spreads, where they buy and sell contracts with different expiration dates, aiming to profit from changes in the price difference as the contracts approach expiration.

5. Arbitrage

Arbitrage opportunities in S&P 500 Index Futures arise when the futures price deviates significantly from the fair value of the underlying index. Traders can exploit these discrepancies by buying or selling the index and taking the opposite position in the futures market, locking in a risk-free profit. However, true arbitrage opportunities are rare and typically short-lived, requiring swift action and large capital.

The Role of Futures Brokers in Trading S&P 500 Index Futures

Futures brokers play a critical role in facilitating the trading of S&P 500 Index Futures. They provide access to the futures markets, offer trading platforms, execute orders, and often provide valuable research and market analysis to help traders make informed decisions.

Choosing a Futures Broker

Selecting the right futures broker is crucial for success in trading S&P 500 Index Futures. A good futures broker will offer competitive pricing, a robust trading platform, and excellent customer service. Here are some factors to consider when choosing a futures broker:

  • Experience and Reputation: Look for a broker with a long-standing reputation in the industry. Experienced brokers are more likely to provide reliable services and understand the intricacies of futures trading.
  • Trading Platform: The broker’s trading platform should be user-friendly, with advanced charting tools, real-time data, and quick order execution. A good platform can make a significant difference in a trader’s ability to react swiftly to market changes.
  • Commission and Fees: Compare the commission rates and fees charged by different brokers. While cost should not be the only factor, finding a broker with competitive pricing can help maximize profits.
  • Customer Support: Excellent customer support is essential, especially for new traders who may need assistance navigating the futures markets. A broker that offers 24/7 support can be invaluable in addressing issues as they arise.
  • Educational Resources: Many brokers offer educational resources, including webinars, articles, and one-on-one coaching. These resources can be particularly beneficial for traders who are new to futures trading.

Cannon Trading: A Trusted Partner for S&P 500 Index Futures Trading

Cannon Trading is one such futures broker known for its deep industry experience and commitment to helping traders succeed. With over three decades of experience in the futures industry, Cannon Trading has established itself as a reliable partner for both novice and experienced traders.

  • Seasoned Brokers: Cannon Trading boasts a team of seasoned brokers who are well-versed in the complexities of futures trading. These professionals can provide personalized guidance, helping traders understand the nuances of S&P 500 Index Futures and develop effective trading strategies.
  • Advanced Trading Platforms: Cannon Trading offers access to advanced trading platforms that cater to the needs of different types of traders. Whether you prefer a desktop application, web-based trading, or mobile access, Cannon Trading has the tools to support your trading style.
  • Comprehensive Market Research: Staying informed about market developments is crucial in futures trading. Cannon Trading provides clients with access to comprehensive market research, including daily reports, technical analysis, and expert insights, helping traders stay ahead of market trends.
  • Risk Management Tools: Managing risk is a fundamental aspect of successful futures trading. Cannon Trading offers various risk management tools, including stop-loss orders and automated trading strategies, to help traders protect their investments.
  • Educational Support: For traders looking to deepen their knowledge of futures markets, Cannon Trading offers a wealth of educational resources. From webinars and articles to one-on-one coaching sessions, traders can access the information they need to improve their trading skills.

Understanding the Risks of Trading S&P 500 Index Futures

While trading S&P 500 Index Futures offers significant profit potential, it also comes with inherent risks. It is essential for traders to understand these risks and develop strategies to manage them effectively.

1. Market Risk

Market risk refers to the potential for losses due to adverse price movements in the S&P 500 Index. Because futures contracts are leveraged, even small price changes can result in substantial gains or losses. Traders must be prepared for the possibility of significant volatility and should consider using stop-loss orders to limit potential losses.

2. Leverage Risk

Leverage magnifies both profits and losses in futures trading. While it allows traders to control large positions with a small amount of capital, it also increases the potential for substantial losses if the market moves against the trader. Understanding the implications of leverage and using it judiciously is critical for long-term success.

3. Liquidity Risk

Liquidity risk arises when there is insufficient market activity to execute trades at the desired price. While S&P 500 Index Futures are generally highly liquid, there may be times when market liquidity is lower, particularly during off-hours or periods of extreme market stress. Traders should be aware of this risk and avoid placing large orders during illiquid periods.

4. Counterparty Risk

In futures trading, counterparty risk is mitigated by the futures exchange, which acts as the counterparty to all trades. However, traders should still be aware of the financial stability of their futures broker, as a broker’s insolvency could result in the loss of funds.

S&P 500 Index Futures are a powerful tool for traders and investors looking to gain exposure to the U.S. stock market. These futures contracts offer numerous advantages, including leverage, liquidity, and the ability to hedge against market risk. However, they also come with significant risks that require careful management.

Futures brokers like Cannon Trading play a vital role in helping traders navigate the complexities of the futures markets. With their extensive experience, advanced trading platforms, and commitment to client education, brokers like Cannon Trading can provide the support and resources needed to succeed in trading S&P 500 Index Futures.

Whether you are a seasoned trader or new to the world of futures, understanding the intricacies of S&P 500 Index Futures and working with a trusted broker can help you achieve your financial goals. With the right knowledge, tools, and support, the opportunities in S&P 500 Index Futures trading are vast, offering the potential for significant returns in the dynamic world of financial markets.

For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if 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.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Hedging with Futures and Speculating with Futures in Futures Trading

Posted on by Ilan

Futures trading is a powerful financial mechanism that plays a crucial role in global markets. It provides market participants with tools to manage risks and seize opportunities in volatile market conditions. The two primary strategies employed by market participants in futures trading are hedging and speculating. Understanding these strategies and their application in the context of futures trading is essential for anyone involved in or considering involvement in the financial markets.

Futures in Futures Trading

What is Futures Trading?

Before delving into the specifics of hedging and speculating, it’s important to understand what futures trading entails. A futures contract is a standardized legal agreement to buy or sell a specific commodity or financial instrument at a predetermined price at a specified time in the future. These contracts are traded on futures exchanges and cover a wide range of underlying assets, including commodities (like oil, gold, and wheat), financial instruments (such as interest rates and currencies), and stock indices.

Futures trading involves both the buyer and the seller agreeing to the terms of the contract. However, unlike traditional buying and selling of assets, futures trading often does not result in the physical delivery of the underlying asset. Instead, many traders close their positions before the contract’s expiration, settling the difference between the purchase and sale prices.

Hedging with Futures

Definition and Purpose of Hedging

Hedging with futures is a risk management strategy used by individuals and businesses to protect themselves against adverse price movements in the market. The primary goal of hedging is not to make a profit but to reduce or eliminate the risk of price fluctuations that could negatively impact a company’s financial performance or an investor’s portfolio.

How Hedging Works

Hedging with futures involves taking a position in the futures market that is opposite to one’s current position in the cash market. For example, a wheat farmer expecting to harvest 10,000 bushels of wheat in six months may be concerned about the possibility of falling wheat prices. To hedge this risk, the farmer can sell wheat futures contracts now. If the price of wheat declines, the loss in the cash market (selling the harvested wheat) is offset by gains in the futures market (selling futures contracts at a higher price than the eventual market price).

Types of Hedging Strategies
  1. Short Hedge: This strategy is used by producers or sellers of a commodity who want to protect against the risk of falling prices. They sell futures contracts to lock in a future selling price for their commodity. If prices drop, the losses from selling the actual commodity are offset by the gains in the futures market.
  2. Long Hedge: This is used by buyers who want to protect against rising prices. For instance, a company that needs to purchase raw materials in the future might buy futures contracts now to lock in the current price. If the market price rises, the company benefits from the futures contracts, offsetting the increased cost of purchasing the raw materials.
Advantages of Hedging with Futures
  • Price Protection: Hedging allows businesses to lock in prices, providing certainty and stability in their financial planning.
  • Cost Control: By fixing future costs, companies can better manage their budgets and financial forecasts.
  • Risk Management: Hedging reduces the risk of unfavorable price movements, protecting profit margins.
Disadvantages of Hedging with Futures
  • Opportunity Cost: If the market moves in favor of the hedger, they miss out on potential profits because their position in the futures market offsets gains.
  • Complexity: Hedging requires a good understanding of the market and the ability to accurately predict future price movements. Improper hedging can lead to increased losses.
  • Margin Requirements: Hedging with futures involves margin calls, which require maintaining a certain amount of capital in the trading account. This can tie up funds that could be used elsewhere.
Real-World Examples of Hedging with Futures
  • Agricultural Hedging: A corn farmer concerned about falling corn prices might sell corn futures contracts to hedge against this risk. If corn prices drop, the loss from selling the corn at a lower price is offset by the profit from the futures contracts.
  • Currency Hedging: A U.S. company that expects to receive payment in euros in six months might hedge against the risk of the euro depreciating against the dollar by selling euro futures contracts. If the euro’s value drops, the loss from the currency exchange is offset by the gain in the futures market.

Speculating with Futures

Definition and Purpose of Speculating

Speculating with futures involves buying or selling futures contracts with the goal of making a profit from changes in the price of the underlying asset. Unlike hedging, where the primary objective is risk management, speculating is about taking on risk in the hopes of earning a return. Speculators have no intention of taking delivery of the underlying asset; they are only interested in profiting from price movements.

How Speculating Works

Speculators analyze the market and make predictions about the direction of future price movements. Based on their analysis, they take positions in the futures market:

  • Going Long: A speculator buys futures contracts if they believe the price of the underlying asset will increase. If the price does rise, the speculator can sell the contract at a higher price and profit from the difference.
  • Going Short: Conversely, if a speculator believes the price will decline, they sell futures contracts. If the price falls, they can buy back the contract at a lower price and profit from the difference.
Types of Speculators
  1. Day Traders: These are speculators who hold positions for a very short period, often just minutes or hours. They aim to profit from small price movements and typically close all positions by the end of the trading day.
  2. Swing Traders: These speculators hold positions for several days or weeks, aiming to profit from short-term price trends.
  3. Position Traders: Position traders take longer-term positions, holding contracts for months, based on broader economic or market trends.
Advantages of Speculating with Futures
  • High Leverage: Futures trading offers high leverage, allowing speculators to control large positions with a relatively small amount of capital.
  • Liquidity: Futures markets are highly liquid, meaning that speculators can enter and exit positions easily without significantly impacting the market price.
  • Potential for High Returns: Due to leverage and market volatility, speculators can potentially earn significant returns in a short period.
Disadvantages of Speculating with Futures
  • High Risk: The same leverage that allows for high returns also amplifies losses. Speculators can lose more than their initial investment.
  • Market Volatility: Futures markets can be highly volatile, and prices can change rapidly. This volatility can lead to significant losses if the market moves against a speculator’s position.
  • Complexity and Expertise: Successful speculation requires a deep understanding of the market, technical analysis, and economic factors. It is not suitable for inexperienced traders.
Real-World Examples of Speculating with Futures
  • Commodity Speculation: A speculator might buy crude oil futures if they believe a geopolitical event will cause oil prices to rise. If their prediction is correct, they can sell the contracts at a higher price and make a profit.
  • Stock Index Futures: A speculator who expects the stock market to decline might sell S&P 500 futures contracts. If the market falls, they can buy back the contracts at a lower price and profit from the difference.

Hedging vs. Speculating

Objectives

The primary objective of hedging is risk management. Hedgers use futures contracts to protect themselves from unfavorable price movements in the cash market. In contrast, the main objective of speculating is to profit from price changes. Speculators are willing to take on risk in hopes of earning a return.

Market Participants

Hedgers are typically producers, manufacturers, exporters, or importers who have a direct interest in the underlying asset. For example, a farmer, oil company, or multinational corporation might hedge their exposure to price changes in commodities or currencies. Speculators, on the other hand, include individual traders, hedge funds, and proprietary trading firms that have no interest in the underlying asset but are looking to profit from price fluctuations.

Risk Tolerance

Hedgers are generally risk-averse. Their goal is to reduce risk, not take it on. They use futures contracts to lock in prices and ensure stability in their financial performance. Speculators, however, are risk-takers. They seek out risk because they believe they can profit from it. The potential for high returns comes with the acceptance of high risk.

Time Horizon

Hedging is typically done with a longer-term perspective, as the goal is to protect against price changes that could impact the business or investment over time. For example, a company might hedge its currency exposure for the next six months. Speculators, however, often operate with shorter time horizons, ranging from a few minutes to several months, depending on their trading strategy.

Outcome Expectations

For hedgers, the best outcome is that the hedge effectively reduces or eliminates the risk of adverse price movements. They are not seeking to profit from the hedge itself, but rather to maintain financial stability. Speculators, on the other hand, expect to make a profit from their trades. Their success is measured by the accuracy of their market predictions and their ability to execute trades at the right time.

Hedging with futures and speculating with futures are two fundamental strategies in futures trading, each serving distinct purposes. Hedging is a vital tool for managing risk and ensuring financial stability, particularly for businesses and investors who have direct exposure to the underlying asset. It allows them to protect against adverse price movements and secure predictable financial outcomes. On the other hand, speculating with futures is about taking on risk in pursuit of profit. Speculators play a crucial role in the market by providing liquidity and helping to discover prices, but their activities are driven by the potential for high returns, which also comes with the possibility of significant losses.

Both strategies require a deep understanding of the futures markets, as well as the underlying assets, and they involve careful analysis and decision-making. For those involved in futures trading, whether they are hedging or speculating, the key to success lies in their ability to accurately assess market conditions, manage risk, and execute trades effectively. Futures trading, with its potential for both risk management and profit generation, continues to be an essential component of the global financial system, offering opportunities for a wide range of market participants.

For more information, click here.
Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if 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.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Gearing Up for Labor Day: Key Reports and Kansas City Wheat Analysis

Posted on by Ilan

Get Real Time updates and more by joining our Private Facebook Group!

Subscribe to our YouTube Channel

Listen to our Market Recap Podcasts on Apple Podcasts

Wheat1

Make it a great trading week ahead!

Labor Day is around the corner…

See reports for the week as well as Kansas City Wheat chart below.

December KC Wheat

December KC wheat resumed its slide into a new low where the chart is satisfying its third downside PriceCount objective. It would be normal to get a near term reaction from this level in the form of a consolidation or corrective trade, at least.

a3dbcb8e e972 4ebb a006 93f5e6760eae

The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk.

Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results. 

stars

ae1ac683 e304 4a89 9e9b 238d83b79e63

Daily Levels for August 27th, 2024

7ef9026c d99f 43d7 8b80 47b006cebdfc

Economic Reports

provided by: ForexFactory.com

All times are Eastern Time ( New York)

46a3b815 7a8f 4865 9725 ab1e93d7b5d8

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Trading Styles in Futures: Concepts for Futures Traders

Posted on by Ilan

Futures trading is a dynamic and complex field that offers numerous strategies to accommodate different trading styles and objectives. Futures traders must understand the various approaches and tools available to them to make informed decisions and optimize their trading performance. This article provides a detailed exploration of several key trading strategies and concepts in futures trading, including swing trading, momentum trading, calendar spread futures trading, butterfly spread, high-frequency futures trading, crack spread, statistical arbitrage, and the impact of low margin rates on futures trading.

Trading Styles in Futures

1. Swing Trading in Futures

Definition and Overview

Swing trading is a popular trading strategy in the futures market that involves holding positions for several days or even weeks to capitalize on short- to medium-term price movements. Unlike day trading, where positions are closed within the same trading day, swing traders aim to capture the “swings” in the market—short-term price fluctuations caused by market volatility.

How Swing Trading Works

Swing traders typically use technical analysis to identify potential entry and exit points. They look for patterns such as head and shoulders, flags, and triangles to predict price movements. Swing traders may also use indicators like moving averages, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence) to confirm their predictions.

The key to successful swing trading lies in timing. Traders must be able to accurately predict when a trend will start and end, which requires a deep understanding of market dynamics and the ability to interpret chart patterns.

Advantages of Swing Trading
  • Flexibility: Swing trading allows traders to maintain a regular job or pursue other interests because it does not require constant monitoring of the markets.
  • Lower Transaction Costs: Since positions are held for longer periods compared to day trading, swing traders incur fewer transaction costs.
  • Potential for High Returns: By capturing significant price movements, swing traders can achieve substantial returns over time.
Disadvantages of Swing Trading
  • Overnight Risk: Holding positions overnight exposes swing traders to risks from unexpected market events, such as geopolitical developments or economic announcements, that can lead to significant price gaps.
  • Requires Patience: Swing trading requires patience, as traders must wait for the right market conditions to enter and exit trades.
Best Practices for Swing Trading
  • Use Stop-Loss Orders: To manage risk, swing traders should always use stop-loss orders to limit potential losses.
  • Stay Informed: Swing traders must stay informed about market news and events that could impact their positions.
  • Focus on Liquid Markets: Trading in highly liquid futures markets ensures that positions can be easily entered and exited without significant price slippage.

2. Momentum Trading in Futures

Definition and Overview

Momentum trading is a strategy based on the idea that assets that have been performing well will continue to do so in the near future, while assets that have been underperforming will continue to decline. Momentum traders aim to capitalize on the continuation of existing trends by entering trades in the direction of the momentum.

How Momentum Trading Works

Momentum traders use technical indicators like the Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), and the Momentum Indicator to identify trends and assess their strength. Once a trend is identified, momentum traders enter positions in the direction of the trend, holding the position until signs of a reversal or a slowdown in momentum appear.

Advantages of Momentum Trading
  • Potential for Quick Profits: Momentum trading can generate quick profits if the trader accurately identifies and capitalizes on strong trends.
  • Clear Entry and Exit Signals: Momentum indicators provide clear signals for entering and exiting trades, making the strategy easier to implement for traders who are skilled in technical analysis.
Disadvantages of Momentum Trading
  • High Risk of Reversals: Momentum trading carries the risk of sudden trend reversals, which can result in significant losses if the trader is not quick to react.
  • Requires Constant Monitoring: Momentum traders need to closely monitor the market to act swiftly when trends begin to reverse.
Best Practices for Momentum Trading
  • Trade in Active Markets: Momentum trading works best in highly active markets where trends are strong and persistent.
  • Use Multiple Indicators: Relying on a combination of momentum indicators can help traders confirm trends and reduce the risk of false signals.
  • Set Tight Stop-Losses: To manage risk, momentum traders should set tight stop-losses to protect against sudden reversals.

3. Calendar Spread Futures Trading

Definition and Overview

Calendar spread futures trading, also known as a time spread or horizontal spread, involves simultaneously buying and selling futures contracts on the same underlying asset but with different expiration dates. This strategy is used to profit from changes in the price difference (spread) between the two contracts.

How Calendar Spread Trading Works

In a calendar spread, the trader typically buys a futures contract with a longer expiration date and sells a futures contract with a shorter expiration date, or vice versa. The idea is to profit from the change in the spread between the two contracts as market conditions evolve. The spread can widen or narrow based on factors such as supply and demand, seasonality, or changes in market sentiment.

Advantages of Calendar Spread Trading
  • Reduced Risk: Calendar spreads generally have lower risk compared to outright futures positions because the trader is exposed to the price difference between the two contracts rather than the full price movement of the underlying asset.
  • Lower Margin Requirements: Because the risk is lower, margin requirements for calendar spreads are typically lower than for outright futures positions.
Disadvantages of Calendar Spread Trading
  • Complexity: Calendar spreads can be more complex to manage than simple long or short futures positions, as traders need to understand the factors that influence the spread.
  • Limited Profit Potential: The profit potential in calendar spread trading is generally lower than in outright futures trading because the price movement of the spread is typically smaller than the movement of the underlying asset.
Best Practices for Calendar Spread Trading
  • Monitor Market Conditions: Traders need to stay informed about market conditions that can affect the spread, such as changes in supply and demand or seasonal trends.
  • Use Technical Analysis: Technical analysis can help traders identify opportunities in calendar spreads by analyzing historical spread patterns.

4. Butterfly Spread in Futures Trading

Definition and Overview

A butterfly spread is a neutral options strategy that combines a bull spread and a bear spread. It involves buying and selling options with three different strike prices but with the same expiration date. In futures trading, a similar strategy can be applied using futures contracts.

How Butterfly Spread Trading Works

A typical butterfly spread in futures trading might involve buying one futures contract at a lower price, selling two contracts at a middle price, and buying one contract at a higher price. The goal is to profit from the price of the underlying asset remaining close to the middle strike price at expiration. The strategy profits if the underlying asset’s price is close to the middle strike price and losses are minimized if the price moves significantly in either direction.

Advantages of Butterfly Spread Trading
  • Limited Risk: The maximum loss is limited to the initial cost of setting up the spread.
  • Potential for High Reward: If the market price ends up near the middle strike price, the potential reward can be high relative to the risk.
Disadvantages of Butterfly Spread Trading
  • Limited Profit Potential: While the risk is limited, so is the profit potential, which is capped by the distance between the middle and outer strike prices.
  • Requires Precise Market Prediction: To profit from a butterfly spread, the trader must accurately predict that the market will remain within a narrow price range.
Best Practices for Butterfly Spread Trading
  • Use in Low Volatility Markets: Butterfly spreads work best in markets where volatility is low and prices are expected to remain stable.
  • Monitor Implied Volatility: Changes in implied volatility can affect the pricing of the options or futures contracts used in the butterfly spread, so traders should keep an eye on volatility levels.

5. High-Frequency Futures Trading

Definition and Overview

High-frequency trading (HFT) is a type of algorithmic trading characterized by the use of powerful computers to execute a large number of orders at extremely high speeds. In futures trading, HFT involves placing and executing orders within fractions of a second to take advantage of small price discrepancies in the market.

How High-Frequency Trading Works

HFT firms use sophisticated algorithms to analyze market data and execute trades at lightning speeds. These algorithms are designed to identify and exploit inefficiencies in the market, such as temporary price discrepancies between different exchanges or financial instruments. The profits per trade are usually very small, but the high volume of trades can result in significant overall profits.

Advantages of High-Frequency Trading
  • High Profit Potential: HFT can generate significant profits due to the sheer volume of trades executed.
  • Market Efficiency: HFT contributes to market efficiency by quickly correcting price discrepancies.
Disadvantages of High-Frequency Trading
  • Requires Advanced Technology: HFT requires significant investment in technology and infrastructure, including powerful computers and high-speed internet connections.
  • High Risk: The high speed and volume of trades mean that small errors in the algorithm can lead to substantial losses.
Best Practices for High-Frequency Trading
  • Develop Robust Algorithms: The success of HFT depends on the quality of the algorithms used, so it’s essential to invest in the development and testing of robust trading algorithms.
  • Monitor Latency: In HFT, even milliseconds can make a difference, so traders need to minimize latency in their trading systems.

6. Crack Spread in Futures Trading

Definition and Overview

The crack spread is a trading strategy used in the energy markets, particularly in oil and gas futures. It involves taking positions in the futures of crude oil and refined products like gasoline and heating oil to profit from the price difference (spread) between crude oil and its refined products.

How Crack Spread Trading Works

A typical crack spread trade involves buying or selling crude oil futures while simultaneously selling or buying futures contracts for refined products. The trader profits from changes in the spread between the price of crude oil and the prices of its refined products. For example, if the price of gasoline increases relative to crude oil, the spread widens, and a trader holding a long crack spread position would profit.

Advantages of Crack Spread Trading
  • Hedge Against Refining Margins: For companies involved in refining, the crack spread can serve as a hedge against fluctuations in refining margins.
  • Speculative Opportunities: Traders can speculate on the future direction of the spread based on factors such as seasonal demand, refinery outages, and changes in crude oil supply.
Disadvantages of Crack Spread Trading
  • Complexity: Understanding the relationship between crude oil and its refined products requires specialized knowledge of the energy markets.
  • Volatility: The crack spread can be highly volatile, leading to significant risks if not managed properly.
Best Practices for Crack Spread Trading
  • Stay Informed About the Energy Markets: Traders need to be aware of factors that can affect the supply and demand for crude oil and refined products, such as geopolitical events, weather patterns, and refinery capacity.
  • Use Risk Management Tools: Given the volatility of the crack spread, it’s essential to use risk management tools like stop-loss orders to protect against adverse price movements.

7. Statistical Arbitrage in Futures Trading

Definition and Overview

Statistical arbitrage (stat arb) is a trading strategy that uses mathematical models to identify and exploit price inefficiencies in the market. In futures trading, statistical arbitrage involves trading pairs or groups of futures contracts that have historically shown a statistical relationship, with the expectation that any deviations from this relationship will eventually revert to the mean.

How Statistical Arbitrage Works

Stat arb traders use historical price data and statistical models to identify pairs of futures contracts that are expected to move together. When the price of one contract deviates from its expected relationship with the other, the trader takes a long position in the undervalued contract and a short position in the overvalued contract. The positions are then held until the prices converge, at which point the trader closes the positions for a profit.

Advantages of Statistical Arbitrage
  • Market Neutrality: Because statistical arbitrage involves taking both long and short positions, it is generally market-neutral, meaning it is less affected by overall market direction.
  • Diversification: Statistical arbitrage strategies can be applied across multiple asset classes, providing opportunities for diversification.
Disadvantages of Statistical Arbitrage
  • Requires Advanced Analytical Skills: Implementing a statistical arbitrage strategy requires a deep understanding of statistical methods and access to large datasets.
  • Execution Risk: The success of statistical arbitrage depends on the accurate execution of trades, and small delays or errors can lead to losses.
Best Practices for Statistical Arbitrage
  • Use Robust Statistical Models: The key to successful stat arb trading is the accuracy of the statistical models used to identify trading opportunities.
  • Continuously Monitor Positions: Market conditions can change rapidly, so it’s important to continuously monitor positions and adjust the strategy as needed.

8. What Low Margin Rates on Futures Means for Your Trading

Definition and Overview

Margin is the amount of money required to open and maintain a futures position. It acts as a good faith deposit to ensure that the trader can cover potential losses. Low margin rates mean that traders need to put up less capital to control a larger position in the futures market.

Impact of Low Margin Rates on Futures Trading

Low margin rates can have a significant impact on futures trading by increasing leverage. With lower margins, traders can control larger positions with a smaller initial investment, which can amplify both potential profits and potential losses.

Advantages of Low Margin Rates
  • Increased Leverage: Lower margin requirements allow traders to leverage their capital more effectively, potentially leading to higher returns on investment.
  • Greater Market Access: Lower margins make futures trading accessible to a wider range of traders, including those with smaller account balances.
Disadvantages of Low Margin Rates
  • Higher Risk: While low margin rates increase potential profits, they also increase the risk of substantial losses. Traders need to be careful not to over-leverage their positions.
  • Margin Calls: If the market moves against a highly leveraged position, traders may face margin calls, requiring them to deposit additional funds or liquidate positions at a loss.
Best Practices for Trading with Low Margin Rates
  • Manage Leverage Carefully: Traders should be cautious about over-leveraging their positions and should always have a clear risk management plan in place.
  • Use Stop-Loss Orders: To protect against large losses, traders should use stop-loss orders to automatically close positions if the market moves against them.

Futures trading offers a wide array of strategies and approaches, each with its own set of advantages and challenges. Whether you are engaging in swing trading, momentum trading, calendar spread trading, or any of the other strategies discussed, it is crucial to have a deep understanding of the market dynamics and to implement effective risk management practices. Additionally, the impact of low margin rates cannot be overstated, as they can significantly influence the risk and return profile of your trading activities.

By mastering these strategies and understanding the underlying concepts, futures traders can better navigate the complexities of the market and increase their chances of success. Each strategy requires a unique set of skills and knowledge, and the choice of strategy should align with the trader’s individual goals, risk tolerance, and market outlook.

For more information, click here.

Ready to start trading futures? Call us at 1(800)454-9572 (US) or (310)859-9572 (International), or email info@cannontrading.com to speak with one of our experienced, Series-3 licensed futures brokers and begin your futures trading journey with E-Futures.com today.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if 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.

Important: Trading commodity futures and options involves a substantial risk of loss. The recommendations contained in this article are opinions only and do not guarantee any profits. This article is for educational purposes. Past performances are not necessarily indicative of future results.

This article has been generated with the help of AI Technology and modified for accuracy and compliance.

Follow us on all socials: @cannontrading

Labor Day 2024 Holiday Schedule for CME Exchange Hours

Posted on by Ilan

Get Real Time updates and more by joining our Private Facebook Group!

Subscribe to our YouTube Channel

Labor Day 2024

Labor Day 2024 Holiday Schedule for CME Exchange Hours (including Globex & ICE Exchange)

Labor Day 2024

*Dates and times are subject to change

If you have any questions, please call the CME Global Command Center at +1 800 438 8616, in Europe at +44 800 898 013 or in Asia at +65 6532 5010

Globex® Labor Day Holiday Schedule for CME Exchange Hours (including Globex & ICE Exchange)

More details at: http://www.cmegroup.com/tools-information/holiday-calendar.html 

Detailed holiday hours for ICE Futures: https://www.theice.com/holiday-hours

The above sources were compiled from sources believed to be reliable. Cannon Trading assumes no responsibility for any errors or omissions.  It is meant as an alert to events that may affect trading strategies and is not necessarily complete.  The closing times for certain contracts may have been rescheduled.

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.

Explore trading methods. Register Here

3b644da2 2bee 4d39 8d98 5208a20bec39

* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

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.