Rate Decisions: How They’ll Affect You and Your Trading
Stock Traders Ask: Should You Explore Futures or Commodities?
Tomorrow’s FOMC rate decision and Chairman Powell’s Q&A will stir short-term volatility—but it’s already sparking deeper questions from stock and bond traders. I recently spoke with a prospect heavily invested in equities who wanted to explore futures and commodities for hedging and speculation. Here’s a working draft of insights I’ve gathered over the years—feedback welcome!
Getting Started with Futures: What You Need to Know
No $25K Rule Like Stocks:
Futures trading doesn’t require the $25,000 pattern day trader minimum. Thanks to micro contracts and flexible broker requirements, entry is more accessible.
Account Minimums & Margins:
- Brokers like Cannon Trading Co. may allow accounts starting at $1,000
- Micro E-mini S&P 500 (/MES): $50–$100 overnight margin
- Micro WTI Crude Oil: $100–$400 margin
- Most brokers require $500–$1,000 to open positions
Realistic Starting Capital:
- $500–$1,000 is technically possible, but risky
- $5,000–$10,000 recommended for beginners
- $25,000+ ideal for treating trading like a business
Tips:
- Use a demo account first
- Choose brokers with low commissions ($0.75–$2.75 per contract)
- Know your risk tolerance—futures aren’t for everyone
Commodities for Diversification
Commodities often have low or negative correlation with stocks and bonds, making them powerful tools for inflation hedging and volatility reduction.
Historical Correlations:
- Stocks: ~0.27
- Bonds: ~–0.07
Suggested Allocation:
Start with 5–10% of your portfolio, depending on your risk profile.
4 Ways to Add Commodity Exposure
Method Description Pros Cons Examples
Know the rates, plan your trades, and trade your plans
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