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Getting Started in Commodity Futures Trading

February 18th, 2019 Filed under Futures Trading, futures trading education | Comment (0)

Getting Started in Commodity Futures Trading

 

Since 1851, futures trading has been a cornerstone of the U.S. financial markets. However, despite its long history, trading in the futures commodities market has remained elusive to most investors. But it doesn’t have to be, trading in futures poses large risks but also substantial rewards to the level headed and well-studied trader.

The futures market deals in commodities. Originally, these commodities were agricultural, but in today’s market they have expanded to include the basic materials that make up most consumer products. Examples of commodities traded on the futures market are: gas, aluminum, currencies, cotton, gold, wheat, bonds, and oil. A futures contract is essentially a contract between a buyer and seller of one of these commodities, to buy or sell at a specified date and price.
In order to take advantage of the opportunities offered on the futures market, a trader must educate himself in supply and demand analysis. It is crucial to research the market trends of the commodities one wishes to trade in as well as seasonal cycles. Only with thorough research and preparation will a trader be fully positioned to capitalize on the trends of their chosen market.

Helpfully, the advent of electronic trading has leveled the playing field and given traders at home essentially equal access to those on the market floor. Electronic trading platforms allow all investors to guide their own portfolios, while maintaining access to licensed brokers who can assist them.

When beginning in the futures market, it is important to use a demo electronic trading platform before going live into the market. Demos allow traders to fully familiarize themselves with the pace of the market, experiencing the fast rise and fall of daily trends without the risk of actual investment. It is advisable to begin one’s futures portfolio with only 2 or 3 commodities, and demo for at least four weeks before going live. This period of time allows a trader to develop important strategies that will carry him through the market’s storms.

After four weeks of demo trading, a trader should feel confident entering the live market. It is a pitfall to get stuck in demo trading and never jump into a live account, so it’s important to remember that as long as a trader has done his research and closely monitored his demo trades, he should feel more confident in using his live account.

Once live, the most important two things for investors to remember are to trust their research over their emotions, and to avoid overtrading. Futures trading can be extremely volatile, a cool head and moderate hand will get a trader out of trouble.

Futures trading is definitely advanced work, but with the right research, a good strategy, and an ability to stay focused and level headed, a trader can conquer their fears of the market. To get started with futures trading, contact the experts at Cannon Trading!

 

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. 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.


Trading Crude Oil Futures

June 13th, 2018 Filed under Commodity Brokers, Commodity Trading, Crude Oil, Day Trading, Energy Futures, Futures Broker, Futures Trading, futures trading education, Options Trading, Trading Guide | Comment (0)

Tips for day trading NYMEX crude oil futures

By Ilan Levy-Mayer, VP Cannon Trading Co, Inc.

When it comes to day trading futures contracts, crude oil futures are assumed one of the leading positions as far as trading volume.

 

During the month of May 2018,  crude oil futures averaged around 1 Million contracts traded per day! That actually surpasses contracts like the ten-year notes, mini SP, mini Nasdaq and others who have traditionally been leaders’ in terms of volume.

 

Part of the growth in crude oil futures is attributed to day trader participation. Day traders, by definition, will enter and exit their positions during the same trading day. This adds volume to the market traded.

 

Some of the tips I am sharing below can be applied to most futures contracts as well as other financial products that are traded like stocks, forex, bonds and others. Some of the advice I am sharing is very specific to the crude oil futures trading field.

 

  1. Know the product you are trading:

 

  1. Just like a trader who trades a stock like Facebook knows what Facebook does, when its earning reports are due and other factors, so does a crude oil futures day trader needs to know a few facts about crude oil:

 

  • Contract Size: Crude Oil Futures consist of 1,000 barrels. For the trader this means that each full $1 move in crude futures = $1,000 against you or in your favor.

 

For example:  A move from 72.10 to 73.10 = $1,000 and a move from 72.10 to 72.11 = $10 (the minimum fluctuation size or the tick size). Be aware that the CME also offers the mini crude contract,  which is half the size.

 

  • Trading Hours: Crude oil futures trade on the Globex terminal between the hours of 5:00 PM CST the DAY BEFORE to 4:00 PM CST the following day. Which means 23 hours of straight trading. It is important to know that most of the volume will trade between the hours of 8:00 AM CST and 1:30 PM CST, as these hours correspond to the “pit session” of the old trading floor.

 

Another key aspect to remember is that crude oil is a deliverable commodity and the “front month” will change every 30 days or so. For example: since May 22nd 2018 we have been trading July crude oil.

 

  • Reports: There are more than a few reports that will affect crude oil future prices indirectly. These include monthly unemployment, the FOMC rate decision, and a few others.

 

However, there are two major reports that move crude oil futures and its by-products (unleaded gasoline and heating oil) sharply: The API report, which comes out at 3:30 PM CST every Tuesday, and the DOE (Dept. of Energy) inventory numbers, which come out almost every Wednesday at 9:30AM CST.

 

Take a look at this one-minute chart from Wednesday, May 16th right around the report time below to understand the volatility involved.

As you can see above, the market made a move of $700 per ONE contract in a matter of minutes, perhaps even seconds! That type of risk and opportunity is one of the factors attracting day-traders into the crude oil market.

 

  • Geo Political Events: Middle East tensions, the Iran nuclear deal, tensions between Iraq and its neighbors…these are all examples of events that affect crude oil prices. Not to mention OPEC meetings!

 

 

  1. Trading Personality:

 

In my opinion crude oil (like many other markets) will have one of the following 3 modes: trending, two-sided volatility, or Choppy/quiet/range bound trading.

 

My experience is that crude will more often fall into the first 2 categories:  strong trend or two-sided volatility.  This leads me to my next point below, different trading set-ups.

 

  1. Trading Set-Ups:

 

My preferred methods for trading crude are either breakout concept in an attempt to catch a strong move up or down once the market broke some key support or resistance levels, AND/OR counter trend methods to take advantage of when the market is oversold or overbought. Crude does seem to bring more fear and greed out of traders. So looking at RSI levels, for example, and using moving averages ON the RSI to try and get a feel for market reversals are methods worth exploring.

 

  1. Keep a journal:

 

Like with any other trading, keep a journal. Take notes on how the market reacted to certain reports, how the markets traded during certain times of the day, and action you took and emotions you had that either helped or hurt you while trading. These notes will help you going forward.

 

In summary, crude oil futures volume has increased significantly these past few years. The crude oil futures offer traders certain dynamics that other markets may not at certain times. Volatility, fear and greed are key traits for this market. Remember that trading crude oil futures specifically and futures and options in general carries a large degree of risk and is not suitable for all investors. Make sure you consult with a series 3 broker if you never traded this market before. As always, I wish you Good Trading!

 

Important: Trading commodity futures and options involves a substantial risk of loss.

The recommendations contained in this letter are of opinion only and do not guarantee any profits.

There is not an actual account trading these recommendations.

Past performances are not necessarily indicative of future results.


Managed Futures, Trading Systems and More! An excellent video 10.26.2016

October 25th, 2016 Filed under Future Trading News, Futures Trading, futures trading education, Trading Guide | Comment (0)

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

Like us on FacebookFollow us on TwitterView our profile on LinkedInFind us on Google+Cannon Trading Futures Trading Resistance & Support Levels and Economic ReportsFind us on Yelp

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 Wednesday October 26, 2016

Greetings!

Continuing with our educational videos, this time a great introductory video into managed systems, trading systems and alternative investments in general when it comes to futures trading. https://vimeo.com/184390982

Read the rest of this entry »


Future Spreads 10.21.2016

October 20th, 2016 Filed under Future Trading News, Futures Trading, futures trading education, Trading Guide | Comment (0)

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

Like us on FacebookFollow us on TwitterView our profile on LinkedInFind us on Google+Cannon Trading Futures Trading Resistance & Support Levels and Economic ReportsFind us on Yelp

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 Friday October 21, 2016

Greetings!

ECB was almost a none event today with minor moves in the markets ( except an erratic and indecisive treasury sector)

Natural gas report came out and prices ended up pretty much where it was before the report…..

A good article about futures spreads available for your trading education.

Another thought for you day traders out there – have you ever considered trading ES vs NQ?
NQ vs YM? etc. instead of just taking an outright position? Read the rest of this entry »


Video Center, Futures Options 101

October 17th, 2016 Filed under Future Trading News, futures trading education, Options Trading, Trading Guide | Comment (0)

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

Like us on FacebookFollow us on TwitterView our profile on LinkedInFind us on Google+Cannon Trading Futures Trading Resistance & Support Levels and Economic ReportsFind us on Yelp

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 Tuesday October 18, 2016

Greetings!

Check out our Top Performing Trading Systems!

A couple of new videos on our video center , including a recording of a Options 101 webinar!

Read the rest of this entry »

Download Cannon’s new eBook, “Futures Forthright” instantly.


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