Noob Futures Questions!

[lbranjord]

I love to invest in high div stocks, and even have a profitable forex strategy. Can someone give me a brief rundown of the pros and cons of trading futures.

Are there free software platforms?

What are the fees?

What is the learning curve for a trader experienced in other areas of investment analysis?

Thanks Guys, appreciate your expertise!:clap:

 

[robster970]

What is the learning curve for a trader experienced in other areas of investment analysis?

Thanks Guys, appreciate your expertise!:clap:

I honestly think that investment experience will bear no relevance to trading futures so you'll undergo a learning curve commensurate with learning to trade which is very long and difficult.

If you can already trade (I'm not sure what you meant by your forex statement), then you should be able to adjust once you get to grips with the personality of the various markets you might be interested in.

With regards to the other questions, they are market dependent. As for an execution platform, you get what you pay for.

If you can provide a bit more context and background I can probably give you less vague answers.

 

[Adamus]

When you short a futures contract, you take on unlimited risk. The only thing that will stop you losing millions is your ability to close the trade and stop the loss.

If for some reason you cannot close the trade, you lose unlimited amounts and the exchange or broker will come after you for it.

Think of being locked limit-up in wheat, or think of having a trade on when a jumbo jet flies into the exchange building and shuts down trading. When you can't think of any more examples, there are always black swans to occupy your mind.

The fees can be quite small. The execution slippage and the spread can get you though.

Plus read a few traders' taglines. My fav is "the market can stay irrational for longer than you can stay solvent"

 

[£10kLoser]

You can trade pretty much all futures through the free MetaTrader platform, although that's been restricted lately if you are in the US. However, Prime4x.com amd WindsorBrokers.biz still allow US traders and give the usual leverage with extremely small margin requirements. Both allow micro contracts.

The statements that losses are unlimited are not correct and the idea that losses are only 'unlimited' when you short are not true either - the risk is the same when you go long.

In practice, your losses are limited by sensible stops and the fact that your trade is closed when you capital runs out. No sensible broker would allow a larger loss because it would mean pursuing the client for money that he may not have! Of course, this does happen but only when stupid traders meet stupid brokers...

The above statement that you could lose 'millions' is ridiculous, given that you would start trading at maybe $1 a pip with a sensible stop loss. Unless, of course, the market suddenly moved several million pips and they didn't honour your stop loss...

Trading is trading, whether it be futures, e-mini, or spot prices and the learning curve is the same for all.

 

[Adamus]

I'm just giving you the worst case scenario. It's always useful to combat complacency if you keep that in the forefront of your mind.

Of course in day to day life you create and live with your own perception of what the risks are. But should understand what the worst case is.

The reason why losses are unlimited when you go short, but not when you go long, stem from the worst case scenario. How far can the market go against you when you are long? To zero, right? And when short? Unlimited upside. OK ok it's theory yes, but it's the basics and it should be one of the first things to learn.