The futures trading market is so different from other investment forms in the fact that you’re making a profit or taking a loss based on something that may or may not happen sometime in the near or far future. It can be based on a long term hypothesis or short term outcome on the horizon, and is generally more risky than other ventures can be due to the amount of time within which a contract can change in value and success or failure. This makes becoming involved in these sorts of investments a little bit tricky, especially because it’s impossible to be successful if you don’t fully understand what you’re getting yourself into and build up a strong skill set before jumping in. For a few things you need to consider in order to be successful in the futures trading market, check out the following tips.
Make A Time Commitment
In the futures market, timing is everything and this means having enough time in your daily life to commit to the number of investments that you’re involved in. This might seem like a simple task, but dedicating yourself to a contract should be as big of a deal in your mind as starting your own business. It may not take as much labor and paper work, but the attention to detail must be there and if you don’t take the initiative to make it a priority it will fail. Danielstrading.com writes:
Do you have ten minutes a day? One hour a week? Use this as a starting point and hold yourself to that time commitment just as you would for your equity investments.
Many people underestimate the amount of time they’ll need to spend truly focused on what is going on during the life of a contract. This includes things like following up-to-date news relevant to your chosen industry or product, and making choices based on what you’ve learned to buy or sell based on this information. This isn’t to say that you shouldn’t get involved if you’ve got a family or a full time job elsewhere, just that whatever amount of time you do intend to place towards this goal, you’ve got to stick by it and make it a priority in your life.
Getting Together Your Margin Money
Another thing that often gets underestimated is the amount of money it takes to get involved in futures trading. If you’re actually serious about making a move in this market then you’ve got to get together enough funds to get yourself in the game. Thenest.com explains:
Each exchange has the right to change its margin requirement at any time. Your broker will tell you how much margin you need to deposit.
The margin differs not only from contract to contract, but also between states and countries as well. What you’re going to pay for a product from Illinois might not be the same as what you’re getting from New York or somewhere else across the country. If you don’t deposit the initial amount you can’t begin to trade on the futures market at all, so gathering that amount and making sure that it’s available for spending is key. Don’t place a large sum of money that you need for your mortgage, groceries and other life necessities into the market as an investment. As mentioned previously, there’s never a guarantee for success on any kind of exchange or market, and in futures there tends to be even more risks involved; although, the reward can be higher as well, which draws in those who want to make an “easy buck”. It isn’t a simple process, and takes quite a lot of skill and organization to create a unique personal plan and follow it for optimum results.
Test Your Skills
Nothing good can come of entering into anything blindly; this is true of ventures that involve money in particular. Even the most confident trader can make a wrong decision if they assume there will achieve success without doing the research necessary to prove that there is truth to this claim before entering into a contract. Of course, it’s impossible to become skilled as a futures trader if you’re a first time investor, which means finding ways outside of the actual market to figure out the inner workings of the system and develop a tried and proven method of buying and selling. Investopedia suggests:
Paper trading is done by mimicking trades by yourself (or with a market simulator) until you feel that you are comfortable enough to begin actually trading.
Paper trades can happen on paper by simply writing down what type of moves you’d make and keeping tabs on the rises and falls in the marketplace to see if your decisions were successful or not. In order to find any talent in this you’ve got to be diligent and honest in how much you’d make or lose and make realistic trades. It’s no good to simply be willing to risk thousands of dollars on something that you really think has no chance of being accurate if in reality you’d never take that chance. This kind of behavior leads to poor judgment in the market and could land you in hot water losing all of your investments in the backlash.
Newer methods of trading practice have recently become popular by utilizing digital tools rather than a pen and pad. Demo or simulators allow you to follow the market in real time and make trades with pretend digital money. This is a safe way to learn the ropes without losing any real capital; abiding by the above rule of playing realistically still applies.
Choose A Broker
Finally, after you’d got the money to begin trading, have trained yourself and created a realistic game plan and made time to give it your best effort, the last step is to choose a brokerage firm and trading platform. This can take some more time and research because you don’t want to pick the first associate that falls into your lap. It’s important to choose somebody you have chemistry with, who has a good reputation with past clients, and that offers extra services and advice to clients.