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For New Traders - Advantages of Daytrading Futures - Part III

After messing around in the stock market of the 60's and 70's I decided there were advantages to the commodities and futures markets.

The first advantage became apparent when the Kansas City Board of Trade offered the Value Line Futures contract. This was a futures contract made up of the value of one share of stock in approximately 1700 companies, as I recall.

Wait a minute, --You mean I can buy and sell an index made up of all 1700 companies on the exchange? Why in the world would I try to choose a stock then? All I have to do is figure out if the market is going up or going down and act accordingly.

Futures Indexes

In 1982 the Chicago Mercantile Exchange brought out the S&P 500 and the life of an index trader was possible. You could buy or sell the equivalent of the 500 largest capitalization stocks in the country, stocks on the New York Stock Exchange, on the American Stock Exchange, on the Nasdaq stock exchange all in one index of 500 different issues. This index was composed of big corporations, utilities, and transportation companies. A smorgasbord of capitalism in its finest state.

Later the Nasdaq 100, an index of the 100 largest companies in the Nasdaq composite was created and offered by the CME. As well as the Mid-Cap 400 and others including the Russell 2000.

Needless to say I was hooked. I didn't need to pay commissions when buying and selling, I paid one round turn commission on each completed trade.

I didn't need to study company's balance sheets and financial statements to determine which one I wanted to invest in.

I could take a long position or a short position in an index futures contract and buy or sell a major portion of the securities that made up the market and I did not need an up tick to sell the security as you do in shorting stocks.

What I needed to do was study, study the charts for the clues that would enable me to take a position long or short in the index of my choice and at the proper time, sometime later, neutralize that position with a profit for my efforts.

By paying only one round turn commission of between $10 and $25 I knew my cost of trading on a direct basis. I then only needed to add the cost of a data feed and charting software to know my capital requirements.

This sounds extremely simple. I wish I could tell you it was. Just open an account and prosper, ordering the boat of your dreams, driving that dream car of your life, and making the wife and kids or husband and kids as happy as possible, free from any financial restraint.

Trading is Difficult - But Rewarding

Trading and investing is the most difficult endeavor you will ever undertake. It will take work, work, and more work and success still may not come. When I first began to speculate in stocks and futures I felt if I worked seven days a week, all awakened hours I would soon have the answer. Not true.

In fact that approach actually made me very ill at one point as I could see after the fact the tremendous profit potential of being right and timely but I still did not have the slightest idea of how to accomplish the feat on a regular and consistent basis.

I found out that overnight exposure affected my ability to sleep as news events overnight sometimes caused extreme opening gaps where the open this morning was many 1000's of dollars from yesterday afternoon's close price.

I decided to focus on day trading. I then decided to focus on daytrading of stock index futures only. A day trade is a trade that you enter during today's trading hours at some point and exit before the market closes today, thus eliminating the overnight exposure. Daytrading may be accomplished with a smaller account than that which is required for overnight exposure.

Learning by Doing

When I began my trading career in earnest, I sure would have been grateful for a service such as our Real-time Signals where experienced traders actually send their commentary, expectations, and trade setups via my browser window. Updating every nine seconds, it is like having the coach of the football team there getting blocked with me as we play the game.

Sometimes the coach loses and when he does we take a lesson from the loss. Normally a comment is made as to why the trade didn't work out. When we take a profit, especially at a price level we have been advised to expect, we get an understanding as to why this trade is working out and what the market will do next.

Successful trading comes from not being surprised at what you see on your real time trading screen or on your overnight update in the use of nightly update for stock investments.

Even if your focus is on overnight trading you can learn how to measure, how the market moves, and eventually learns to see the bigger picture and be able to draw the possibility of the next few bars.

I could have saved myself $1000's of dollars if the Real-time Signals had been available to me when I began. I would have loved to pay them 2-3 years of the subscription price as compared to the tuition I did pay.

You will be paying tuition in one form or another if you are above average in this endeavor. If you are below average you will be busted out and not in the business for very long.

Trading and investing is as complicated as brain surgery in my opinion. Why not subscribe today and allow us to save you great pain and frustration, as we will guide you through the learning experience as we trade. Take a free trial today.