While looking up for some stock market tips, it can seem worthwhile going through a few Future trading tips. Trading future contracts can actually be a lot more advantageous than trading in equities. If you have been earning profits through speculation, you will find futures a better way to hedge and manage risks.
Here is why trading in future contracts may seem better than trading stocks:
More profit against lower investment
When you trade in futures, you basically put in only 10% of the contract value, which is referred to as the margin. So you can actually expose yourself to a greater value of stocks than what you can buy if you go for the original stock. Also, if the market happens to move in your direction your profits will multiply.
For instance, if you wish to invest $1250 and buy Apple Inc. stock, which is priced at $125, you will get 10 stocks. However, if you go for a futures contract, you can get a contract that holds 100 Apple Stocks for the same money (100 stocks of APPL would cost you $12500 but you are paying only 10% margin, which is $1250). Now let us say the stock price goes up by $10. You would be making a total profit of $100, if you invested your money in stocks. However, your profit would be $1000 if you went for the Apple futures contract.
Lot of transactions happen in futures trading on an everyday basis, which is why futures happen to be very liquid. With buyers and sellers marking a constant presence in the future markets, you can expect to place your orders quickly by following Future trading tips. Also, since the prices may not fluctuate too much during the end of the contracts, you will be able to clear your position easily without any kind of adverse impact on the price.
Low commissions and execution costs
When compared to stock trading, the commission in futures trading is very low. It is usually charged only after the position gets closed. In general the total commission would come up to only 0.5% of the contract value. Nevertheless, it is all based on the kind of service that your broker provides. Full service brokers will charge higher commission on futures trade when compared to the online brokers.
Chance to make Fast Money
If you are endowed with good judgment and are able to find some excellent Future trading tips, you should be able to make some fast money in futures trading. Remember you are getting 10 times better exposure here when compared to normal stock trading. Also, the prices here move much faster when compared to cash or spot markets. However, there is the risk of losing more money, which you can minimize through stop-loss orders.
Possibility to short sell
While short selling is prohibited in stocks, it is very much legal in futures contract. In fact short selling can work as a very efficient technique during a bear market if you follow Future trading tips. So you can essentially win even in a losing market if you embrace futures trading. There are many investors who use short in order to hedge.
Futures offer great advantages and can appeal to any investor, whether speculative or not. However, it is very important to tread carefully. Else even the best of Future trading tips may not stop an investor from experiencing huge losses if he takes highly-leveraged positions and exposes himself to large contract sizes. Get in touch with the experts at Share advisor to find out how to do it right.
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