Futures Trading - How fortunes are made

Futures Trading - How fortunes are made

If you ever had a business that has made many people lots of money that is the future of trading, also known as commodity futures. This is a business that has made millionaires and multi-millionaires in a very short time, while starting with relatively small capital investment.

Just what is a "futures trading"? Loosely defined, and the future is an agreement to buy or sell a specific quantity of a commodity at some future date at pre-negotiated prices. You "speculate" the direction prices will take and decide to buy or sell based on that. Prices are, to some extent, predictable.

For the money potential in futures trading is astounding. Examples, John Henry started with $ 16,000 and amassed wealth worth more than $ 1.5 billion. Richard Dennis borrowed $ 1,600 and made $ 200 million for ten years. Granted, these examples are atypical. But you can see the potential.

Unlike other forms of business and commerce, real estate, stocks, bricks and mortar, etc., where you have to wait years to see any substantial returns in the future of the market immediately.

Better yet, you can start from your kitchen table, you never handle or deliver physical commodities, or market or advertise, and you can buy or sell large or small quantities.

You also have the choice of a wide range of products from gold, grain, crude oil, gasoline, currency, and agricultural products and many more to choose from.

As with any business where you can make money very quickly, too, can lose money very quickly. This is one reason why this business is not for everyone. It certainly is not for those who tend to be emotional when things do not go as you seem to be intended.

In fact, the more you are able to keep their emotions under control, the more money you can make as panic and hysteria are the best friend of commodity traders.

When starting out, you may make losses. This is expected and may be a good thing even success can give the wrong impression of your abilities, and lead to disaster. Loss should be treated as part of the business and the learning process. The key is to limit your losses by learning to trade like a professional. How?

Professional access futures as a business, as opposed to a slot machine hit-or-miss approach most people do. And, as with any business needs to understand how the market works.

This means learning as much as you can about business. And no, do not have to pay $ 2,500 to attend some seminar to learn "insider secrets". You would be better if I could travel to Chicago or New York Board of Trade "and observe professionals at it.'ll Learn more this way than in any seminar.

Back to limit losses. One way to limit the loss (risk management) is an end-loss trade. Before you determine the amount of risk you are going to take, and stick to it. Successful traders always have a Stop-loss order before initiating the trade.

Trading without a stop loss can have devastating effects, especially to the inexperienced trader as they can find themselves unable to pull the plug, until it is too late.

Another key is diversification. As they say "never put all your eggs in the same basket." A rule of thumb is not risking more than ten percent of your capital in one trade, thus preventing the loss of all your money in one or two bad trades.

Amateurs also make the mistake and re-invest all their income, then it is lost on the road. Professionals pull their profits and start small again, making small increases capital to facilitate growth.

Good record keeping is also important in that it shows you what is working and what is not, and patterns.

Contrary to what one can hear you do not need much money to begin with commodity trading. A good brokerage firm can help you get started without spending a fortune.

Details of running a successful business futures trading outside the scope of this article. The best investment you can make is to spend time learning how business works, starting with the basics.