Business and Investment sidenote

There is an alarming number of new, and uneducated, commodity traders losing just about everything they own. Why? There are a number of reasons why a new futures trader stands back, scratches his/her head and wonders why their trading account went from thousands of dollars to almost nothing over night.

What happened?

There are actually a number of things that came into play.

1. First and foremost. They believed all the hype that they would become rich over night.

2. They did not buy a good course on how to trade the commodity markets.

3. They picked up some books on trading at the library, or worse, they signed up with a trading forum on the Internet and believed everything the so called experts said about getting rich over night in the futures markets.

4. They did not have a trading plan before they placed a trade. A disaster in the making.

5. They believed everything their broker told them. A NOTE: All brokers are not bad.

So what are new traders supposed to do. How do they keep from losing all their money in their first month as a commodity trader?

There are two very basic ways to learn the craft of trading.

1. Paper trade. Learn what to do before risking a penny.

2. Trade Mini-Futures contracts. Keep any loses to a minimum.

There are multitudes of commodity trading books on how to make money trading futures contracts. However, a person will be hard pressed to find how-to books devoted exclusively to trading Mini-Futures.

The reason I believe is that Mini-Futures lack the glitter and claims to instant wealth found in the more traditional commodity trading manuals.

It’s unfortunate, but an alarming number of new traders will read one or more of the how-to books on commodity trading and jump right in and place a trade order not fully comprehending the real risks involved in trading.

Futures prices can and do make extreme price swings. New traders, because they lack experience, are unprepared to handle the large losses when trading standard futures contracts when prices move suddenly against their position.

Mini-futures are not immune from the same extreme price move. However, the dollar loss is considerably less. Mini futures contracts will let a new trader survive a sudden market shift and have money left in their trading account for the next trading opportunity.

What about limiting your losses with Stop Loss orders?

A Stop Lose is supposed to keep you from having large losses. Right? Not necessarily. There is what is called Daily Limit Moves, known as Limit Move, in futures trading.

A Limit Move means that a commodity price can only change up or down a certain amount during a trading session. When that happens trading stops until whatever caused the drastic price shift changes.

When a commodity makes a limit move against you it can shoot through your stop loss as if it did not exist. If you are unfortunate enough to get stuck in a Limit Move against you that last two, three, or more days you will be wishing you never heard of trading commodities.

This is not an everyday occurrence that you have to lose sleep over, but you need to be aware of it.

Trading futures can be a very profitable way to earn a living if you treat it as a business. Trading in the commodity markets is an extremely high-risk business and as with any business you must first learn the business so you won’t lose everything you own.

Think of it as if you suddenly wanted to be a high wire performer in a circus. You would be in serious trouble if you put on the flashy tights, went up 50 feet and inched your way out on the wire before you learned the craft of tightrope walking a foot off the ground. Fifty feet is a long way to fall without a net to catch you.

Trading in the futures markets, and even the FOREX markets is considered very risky. You must learn how to do it without putting your entire financial world at risk.

When I say risk I mean how much money you stand to lose if a trade goes against you. Your risks are anywhere from 20% to 50% less with mini futures over the more standardized commodity contract.

As an example a 20-cent move against you in corn is $1000 while the same move in the mini corn is only $200. Another great feature of the mini futures markets is the investment required to trade a mini commodity is also 20% to 50% less. A mini wheat contract currently requires about $400 to trade while the full size contract requires more than $1400.

A final note: The FOREX markets also have mini-contracts. But, the same risks apply.

Most people claim that futures trading is a risk due to the volatile nature of the markets. Nevertheless, futures trading is suitable for those who have sufficient risk capital and a personality that is not afraid of risks. Nowadays there are many successful traders who make constant profit from the futures and options markets, but they are experts who know even the smallest and the most insignificant detail about their business.

Futures trading represents the business of buying and selling contracts on commodities and companies trade futures in order to lock in their cost of needed product. Regardless of how efficient they are, all traders need a tool which helps them track futures and options, eliminate calculation errors, keep track of their orders, handle multiple trades, prepare statistical analysis and so on. This is where futures trading software plays an important role. If you don’t have a program which records your trading and if you are using a simple spreadsheet to record your training data, you certainly need to resort to futures trading software. This software will ease many of your daily tasks and help you be successful in today’s financial market place.

Furthermore, futures trading software satisfies all the needs of individual traders, regardless of the size of the trading account and regardless how frequently you trade. Instead of spending precious time on recording your trades and calculate profits, you can focus on analyzing the markets and on creating trading strategies. It is a proven fact that efficient futures trading software saves you precious time and helps you become successful in your field of activity.

You can revolutionize your trading strategy if you decide to resort to futures trading software, which will enable you to create highly accurate trading systems. All trading software works with stocks, futures, currencies and other financial instruments and its only purpose is to ease your tasks. Moreover, trading software is easy to use and it enables you to develop your own trading strategies. With futures trading software you no longer have to worry about losing precious information or spending too much time finding the trading data you need.

Nowadays, traders working from all over the world have the possibility to do online futures trading. All they need is a computer, an internet connection and a profitable trading system. However, online futures trading represents a competitive business and an excellent trading system is vital if you want to succeed in this field of activity. Fortunately, online trading companies offer traders the information and the resources they need in order to formulate a trading plan; of course, their assistance is not free but it is worth every penny.

It is a good thing that the internet has made current price information available and that software programs have trading programs which predict price direction. Thus, traders have a higher chance of success and they can enjoy the benefits of online futures trading and efficient trading software. Nevertheless, even with the best trading programs at your disposal, online futures trading can never guarantee your success since futures trading is a risk-based business.

Trading software will show you how to use simple and advanced strategies and how to find, verify and trade advanced and intermediate strategies. The trading software also helps traders foresee the future trend of prices, thus enabling you to make gains out of the fluctuations of share value. If you want to cut down your losses and to have at your disposal more time for coming up with a trading plan, it is time you bought trading software.