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 THE ABC OF... |
11 things beginners should know about futures
1. Futures is a zero-sum game. For every contract that makes someone money, someone else has lost it.
2. The fastest way to lose money on futures trading is to ride your losses way beyond what your trading system or money management principles are telling you. Don't get stubborn with your losses, overly optimistic or let your ego get in the way of a trade. Losses in this game can add up fast.
3. The best markets to trade are the ones where you have the most expertise. You need to understand what factors and events drive the market - and in which direction - before you take the leap.
4.The most popular futures contract is the Sydney Futures Exchange Share Price Index (SPI) 200 - which is the benchmark equity index futures contract in Australia. The contract is based on the S&P/ASX 200 index.
5.Having tied the knot on 25 July 2006, the Sydney Futures Exchange and the Australian Stock Exchange are now one entity. Today the exchange stands at the ninth largest in the world.
6.Many experts say that you should only commit 10 per cent of your risk capital (money that you can afford to lose) to trading the futures market.
7.Newcomers should sharpen their teeth on liquid, trending markets that present opportunities for steady returns.
8.Beginners should concentrate on no more than two contracts at any one time. Anymore than this and novices can start to feel out of control.
9.Many skilful traders specialise. You don't have to be an expert in every futures product to be successful.
10. If you don't have access to real-time quotes, you should probably take a longer-term approach to trading futures. Taking a longer-term approach will also give you time to study a market properly, to identify trends and let your profits run. Furthermore, use historical data to get an idea of the typical high and low prices of the instrument you intend to trade.
11.Lastly, do your homework on futures trading (you can start with our comparison tables) and use this knowledge to start paper trading before committing real money.
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