What should I trade? Stocks, futures, options, commodities..?

canterburry

Newbie
3 0
From the news, books and just general interest, stock invensting seems to be the most popular and is the first thing that comes to mind when we talk about "investing" or "trading".

However, when I look at what investment banks, hedge funds, quants etc are doing, they seem to be looking much more towards derivatives, options pricing, futures. Few or fewer seem to actually trade stocks for their own accounts or invest serious research power into stock trading....unless you are a mutual fund.

I might be completely off here and may be hanging around too many quant forums....

Anyhow, I am very new to investments and look to trade in the short to medium term. Different instruments require different skills and knowledge...

Why do you trade what you trade?
 

Rhody Trader

Senior member
2,620 264
In many cases, hedge funds stay out of individual stocks because they don't offer the liquidity required for their size. Also, there are filing requirements if one takes or intends to take a position of I believe 5% or more. Things are different when you're talking about ETFs, though.

Futures (financials and the major commodities) and forex are favorites of many hedge funds because the are large, liquid markets.

Stocks are an easy market for a newbie to figure out as what the represent makes sense to most folks. Forex is probably the second option. It can be a bit tricky figuring out what's going on when you're getting started, but the barriers to entry are almost nil. Futures are comparable to forex, but even with mini contracts and e-trading are out of reach for some folks. Options are probably best left until you have a good understanding of the underlying market first.

I've traded all of the above to a greater or lesser degree, but stocks and forex are the two I've traded most.
 
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Trojen

Junior member
33 3
At the moment I exclusively trade the Alsi (Stock index future of the FTSE Top40 - South Africa). I do this because it is my local market with local support (technical and social).
Once I am happy with my results here, I look to trade a few global indices like the DAX and the FTSE perhaps (staying within my own time-zone). Spreadbetting seems to be the way to go and most prob with IGIndex .
I digress......I have invested in shares (need plenty capital and patience), options (subject to the mercy of the market-maker) and now futures. I particularly like index futures as you get a lot of bang for your downpayment (as a full-time trader I can generate a "salary") and the index is a composite of many stocks and is thus less prone to manipulation.
I see many traders on this site use Forex, unfortunately I have not dabbled with these. Seems like a different ball-game with different terminology and relationships :confused:
Best of luck
 

craigthinks

Junior member
19 0
Start simple, Buy low and sell high with stocks or ETFs. Or short with Sell high and buy low.
Find a stock trading group in your town or start one.
Options are way more complicated and hard to do taxes for.
Forex maybe, but lots of reversals and draw downs.
Futures would be good except cannot buy just a little of, except some forex companies have.
First, play money after being successful. Tiny stock trades. Then increase your trade sizes.
Read a new trading book at least once a year. You are always learning.
Plan, Record, and review your trades in a spreadsheet.
Beware people that want you money for any reason. Ask for proof on everything.
The best traders in the world do 15-30% years with large sums of money.
There are a few traders in my trading group that can do 300% on small account, but I could not do it as trading is an art form.
One guy in my trading group does about 30-50% per year with only 8-16 trades per year with ETFs. But he always breaks his only trading rules and just go on a feeling.
 

ChocolateDigestive

Experienced member
1,153 281
From the news, books and just general interest, stock invensting seems to be the most popular and is the first thing that comes to mind when we talk about "investing" or "trading".

However, when I look at what investment banks, hedge funds, quants etc are doing, they seem to be looking much more towards derivatives, options pricing, futures. Few or fewer seem to actually trade stocks for their own accounts or invest serious research power into stock trading....unless you are a mutual fund.

I might be completely off here and may be hanging around too many quant forums....

Anyhow, I am very new to investments and look to trade in the short to medium term. Different instruments require different skills and knowledge...

Why do you trade what you trade?
In the US most prop traders trade stocks. As you are in the US why don't you contact a few local prop traders, either pick a momentum or mean reversion strategy and start ripping it.
 
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