Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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.
- How much risk capital do I have?
- 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….
Even within the futures asset class you still need to decide what specific market is suitable for your trading style, risk tolerance and personal preferences.
Different markets have different personalities. Some of the most popular markets traders will choose from within the futures markets are:
Stock index futures like mini SP 500, mini NASDAQ futures, mini Dow and Mini Russell. Movement will track the cash index and the overall stock market which most people are familiar with. Great trading volume. Main activity is during the open of the US stock market.
Another popular market is the crude oil futures. A volatile market. Main activity is between midnight to 11 Am EST. This market can experience big moves and sharp moves. Will punish or reward you quickly.
Similar to the crude oil in many ways is gold futures. Each $1 move in gold price will equal $100 in your favor or against you per contract. I have seen gold move $3 to $10 in couple of minutes during volatile times…
This post is probably to short to share everything about the different markets. However, Cannon Trading offers more than a few tools to help you and I highly recommend you take advantage of it.
- Try a real time futures trading demo. Real prices, live charts, MOCK $$$. Test drive the different markets, try different strategies before jumping in with real money.
- Combine the free demo with unlimited access to a professional, experienced series 3 broker who can really shorten your learning curve and answer many questions and guide you the right way.
- Sign up for our daily updates and continue to expand your trading education.
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.