Tag Archives: futures

General Business

Distinctions Among Spread Betting Together With Futures Trading


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The stock market provides you with a number of intriguing trading options. That you can do normal day trading in shares or currency in the physical space or if you are more adventurous and wish to make optimum utilization of limited monetary resources, you can go for trading in derivative instruments such as financial spread betting or margined trading, futures trading or cfd trading. The derivative instruments fall in the arena of speculative activity and therefore are therefore fraught with greater risk than cash market trading.

Let’s compare financial spread betting with futures trading. Basically both of them are leveraged or geared financial instruments where you just pay margin money in order to trade inside a higher volume of shares. This margin cash is typically between 15-20% from the actual worth of the amount of shares you are trading in and therefore represents an opportunity for you to definitely make quick gains if the market movement be in consonance using the position you’ll have taken. Both do not attract any kind of stamp duty which explains the key reason why they’re very popular. You’re able to keep the profit you are making as a whole and that’s an excellent advantage. However, when you make losses, those losses are for good because you cannot offset it against any profits in future.

Futures trading contracts have an expiry period and you’ve got the liberty of holding your position till that date and allow it to expire or close the contract prior to the date. In any case, there’s no physical exchange of shares. The futures contract price is also confined compared to the underlying and this is referred to as the funding charge.

Financial spread betting also has a expiration period and the price already includes a premium that is incorporated into the cost. You are able to close the position like you would do in futures or ensure that it stays till expiration and let it expire by itself.
Financial spread betting dealings are between your trader and the market maker unlike futures where the contracts are handled by the exchange. The regulation in margined trading is much lesser than in futures trading. Both derivative products do not involve any physical exchange of assets though their movements provide the movement from the underlying.

To sum up, it is better to complete financial spread betting and / or deal in futures trading only after understanding their nuances in greater detail.

Get more details on the many differences as well as commonalities of these 2 derivatives – Financal Spread Betting and Futures Trading at independentinvestor.co.uk.

General Business

Trading Commodity Futures Via The Internet

Before online commodities and future trading became the high-rolling, high-stake investment ground that it is today, its early proprietors were farmers of the 1800’s.

These farmers would grow their crops and bring these to the market come harvest time in the hope of selling them. But the main concern then was that without an indicator, they could not efficiently gauge how much of their goods are needed therefore resulting either to shortages or excesses, both causing losses for the farmer.

With shortages causing loss of the opportunity to earn more and excesses causing meats and crops to rot and dairy products to spoil. Also, when a certain produce is out of season any product made from them would be priced so high due to its scarcity.

A central marketplace was subsequently created for farmers to take their harvests and sell them either for immediate or forward delivery. Immediate delivery is what is known now as the spot or cash market and forward delivery is now called futures market.

This concept helped stabilize prices for commodities that were out of season as well as served as an effective indicator of supply and demand therefore saving farmers thousands of dollars that would otherwise go to spoilage.

From forward contracts evolved commodities and futures contracts. Forward contracts are effectively agreements to buy now for payment and delivery at a specified date in the future, which is usually three months from the date of the contract.

These were originally only for food and agricultural products but now they have expanded to include financial instruments. Forward contracts have evolved and have been standardized into what we know today as futures contracts.

Basically, when dealing in online commodities or futures trading, a contract must have a seller (the producer) and a buyer (the consumer). If you purchase a futures contract, you are agreeing to buy a commodity that is not there yet for a specific price.

Although most futures contracts are based on an actual commodity, some futures contracts also are sold based on its future value based on stock market indices.

Unless you are a businessman who is into the trade of the actual commodity you purchased, you won’t actually use the goods (if you’re the buyer) or actually provide the commodity (if you’re the seller) for which you’re trading a futures contract.

Remember, buyers and sellers in the futures market primarily enter into futures contracts to minimize risk or speculate rather than to exchange physical goods.

On the other hand, online commodities differ from futures trading in that commodities trading may involve the physical delivery of the goods. In which case a receipt is issued in the favor of the buyer. This receipt enables the buyer to take the commodity from the warehouse.

Traders in online commodities and futures market can use different strategies to take advantage of rising and declining prices. The most common are known as going long, going short and spreads.

When an investor enters a contract by agreeing to buy and receive delivery of the commodity at a set price – it means that he or she is trying to earn from an anticipated future price increase, he or she is going long.

When he or she is looking to make a profit from declining price levels, this is going short. The speculator sells high now so he or she can repurchase the contract in the future at a lower price.

When one makes a spread, however, he or she is trying to benefit from the price difference between two separate contracts of the same commodity.

As an online commodities or futures trader, therefore, you should be armed with a firm grasp of how the market and contracts function.

General Business

Coffee Futures Trading

Coffee is one of the world’s most popular beverages and is considered among the globe’s most important of the commodities that are traded internationally. Today, the prime market for trading coffee, cocoa and sugar futures and options is the CSCE at the Commodity Exchange Center in New York. It has been in operation since 1993.

As an exchange, the CSCE is not responsible for the price coffee trades are set. However, what it does is supply a free-market and tangible venue wherein traders are able to make options and futures transactions under the laws and regulations stipulated by the Exchange.

All of the options and futures traded under the CSCE are uniform and that grade, delivery times, locations and quantities are constant factors.

The only item that is negotiable is price. With the environment espoused by the exchange, coffee prices and the prices of other participating commodities are allowed to hit their natural levels — a move that is often referred to as ‘price discovery’.

Trading coffee futures has a strong demand because its supply is relatively abundant, depending mostly on weather conditions, that’s why coffee is grown primarily in areas with subtropical climate.

Weather is one of the greatest influences in determining the world supply of coffee. Aside from the weather, the price of coffee in the trading market is also subject to consumer tastes and demands.

At times when price variations are at normal levels, coffee demand is deemed inelastic. What this entails is that when the price of coffee rises, people do not necessarily reduce their intake of coffee, and that even when the price of coffee declines, consumers also do not react much differently. However, if the increase is significantly great, there is a likelihood that demand would drop commensurately, as what happened in 1977 and 1976.

The price of coffee is thereby determined by a public consensus on the Exchange floor. This is called the ‘open outcry’, where traders bid vocally, to give an assurance that every trade is transparent and competitively completed. Within the ‘open outcry’, all participants are given the chance to either sell or buy at the best price available. After which, the Exchange will distribute the prices determined to different parts of the world.

Basically, there are two kinds of market participants on the trading floor: the investors and the hedgers. The investors are those people who seek gains based on changing prices. Their orders are usually coursed via brokerage firms, or futures commission merchants, or via commodity funds managed by CTAs, or commodity trading advisors.

On the other hand, hedgers are the commercial companies that trade in the futures and options market in the hope of reducing their risk against unfavorable pricing shifts in the actual market. What hedgers do is lock in rates for futures buys or sales. Some of the pioneering hedgers included coffee makers, importers and roasters.

There is still a lot more to be learned about coffee futures trading. However, if you’ve already had experience dealing with commodity trades, this should be easier for you. Coffee is a product that can be easily tracked and for which a lot of information is available. In fact, it is considered one of the safest commodities to trade in.

General Business

Your Stop Loss Is Critical When Day Trading Futures

Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract. Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you. Stop loss orders don’t guarantee against losses but they drastically reduce risk by limiting potential losses.

With my system the only stop I use is what I call an emergency stop. My stop loss is automatically made when I make my initial trade at two points. It is only for emergencies, like news I wasn’t expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade. I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per. contract. Usually I will only have to exit and reenter a trade one time if I have entered a trade to early. This means I only lose a small commission per contract instead of fifty dollars per point- per contract, when trading the e-mini, and taking what many consider
a normal loss.

Trading the futures markets is a challenging but profitable opportunity for educated and experienced traders. However it is not easy, without a great trading system, and even traders with years of experience still incur losses. Finding a good trading system and trading in small increments with an emergency stop loss in place will allow those relatively new to futures trading to be successful. Once you have learned the skills you need to trade with consistent profits it will not be a problem but until that time it is absolutely critical that you do not take unnecessary losses. If you are new to trading futures you should never trade until you have a mentor with a trading system that gives you consistent profits.

A great way to protect profits if you have not established an exit strategy is the trailing stop. The trailing stop loss is an order that is entered once you enter your trade. Your stop price moves at a specified distance behind the market price. Trailing stops are raised when a price rises, in a long trade, but will remain stationary when it falls. Trailing will only occur when the market price moves in favor of the trade to which the order is attached. The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against losses. Trailing stops are designed to lock in profit levels and they literally trail along your increasing profit and adjust your stop loss levels accordingly. Often traders will find tailing stops confusing because they change them while in an open position. This is not a wise practice, and should be avoided. It is an indication that you are not sure of your trade and if one is not sure of a trade it would be wise to exit immediately. Trailing stops are ideal because they allow for further profit potential to enter due to momentum, while limiting risk. Trailing stops are an important component to a trader’s risk management unless they have an exit strategy in their system that might serve them better.

The market order is the simplest and quickest way to get your order filled to enter a trade or to use as a stop loss. A market order is a trade executed at the current market price and they are often used to exit trades to ensure that the order has the best possible chance of execution. A market order to exit is simply an order used to exit the trade immediately. Be aware that in a fast-changing market sometimes there is a disparity between the price when the market order is given and the actual price when it is filled.

Stop loss orders are used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only. If one uses them as their exit they will risk more than is necessary and might want to find a better system to trade. Stop loss orders allow you to define your risks before you open a position and in my opinion that risk should be minimal. Stop loss orders are one of the easiest ways to increase your chances of survival when trading commodities and futures and they are a powerful risk-management tool.

Forex Trading Articles

Spot in Forex Futures

There is always a fight on the issue of Forex future and Forex spot that which one is better to trade at but as usual no satisfactory results because every individual has its own logic to prove his/her point correct and nobody else can falsify others logic.

In this discussion, we are not considering the points of leverage, guaranteed returns and expiry of the contract. The points that are mentioned will help to recognize whether the Forex future is a good alternative to trade or Forex spot.

Trading hours: Some Forex spots propagate that they are the only place that provides twenty-four into seven hours trading. However, this is not at all true as both Forex future and spot twenty-four hour a day and five days a week. The Forex trading market remains closed from Friday afternoon to Sunday afternoon in North America. So, this point is dropped for further discussion as the time limits are same for both the concerns.

Forex spreads: The spread rate is not fixed in Forex futures and it may be from one pip or lower and sometimes it becomes negligible depending upon the market volatility. In Forex spot, the spread is variable but it varies with wide range around 2-3 pips or more in some major currencies. However, the advantage of spreads can be fetched in Forex futures trading.

Commissions: The Forex spot dealers do not take commissions because they can make money from spreads that is why spots are greater in forex spreads as compared to futures. The Forex future dealers take average commission of around 3.15 USD on per entry and exit that is equal to 6.30 USD each contract. Thus, there is no need to pay commission in Forex spot trading.

Flexibility: The Forex spot dealers have more volatile lot sizes. The Forex future has two defined lot sizes. The full-size spot contract usually has a bigger lot of around 100K in the Forex spot market and a mini contract is equal to the half of the full-size spot contract. The bigger lot sizes can make money management very difficult and this makes it an advantage of spot Forex trading.

Thus, there are some advantages and disadvantages remain attached with both the type of Forex contract of future or spot.

The article puts forth the advantages and disadvantages of the Forex trade contracts of Forex futures and spots to make it easy to differentiate that which one is better to trade with at the trading platform.