There are three distinct trading styles that can be implemented in trading futures:
One can "scalp" the markets in attempting to capture very small, quick profits.q
One can trade market "swings" that last one, two or several days and attempt to profit from moves of a larger nature.
And, traders can trade from a long term perspective, trying to secure profits from large movements in price over an extended period of time, which could be weeks or months in length.
All three styles have their proponents. All three have advantages and disadvantages. What is key is that the trader pursues the style of trading that BEST fits his or her personality, strategy and intended discipline.
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I personally feel that swing type of trading best fits my psychological profile. I am comfortable taking moderate, measured risks in an attempt to capture what I consider to be significant profits in percentage terms of my account equity. Other traders, especially on-line traders prefer to trade in and out quickly by "scalping" profits from the markets through the use of small, frequent trades. Discipline and adherence to a pre-planned strategy is critical in successful applications of both of these types of trading.
The remainder of this article will focus on the third approach to trading in the futures markets. Long term position trading. The pursuit of the homerun trade. The big hit. To capture a major move. This type of trade is what dreams are made of. To make a fortune in beans, or to catch a currency move the way that George Soros did years ago. NEEDLESS to say that just like any other method (scalping, swing etc.) the risk in trading futures is substantial and that only risk capital should be used. Past performance is not indicative of future results.
The favored tool for accomplishing this trade is the futures option, a derivative of the futures contract. Buying puts or calls either outright or on a spread basis is what we are talking about.
The advantages of using options for this purpose, to capture major moves are twofold. First, when purchasing a put (expecting lower prices to come) or a call (expecting higher prices in the future) the absolute maximum risk is a known amount. You can lose up to 100% of the purchase price of those options + the commission cost, but not a penny more. Secondly, random, daily volatility, which could stop out a futures position, since using stops on futures positions is a must, could prematurely stop out your position before the move has time to develop as anticipated. This occurrence is not a concern when holding an option contract. A temporary price movement contrary to the expected direction of the option trade, will not be a concern to the option holder. This is a critical factor in being able to manage a long term position strategy. Risk management is so vital in all speculative trading endeavors. Your experienced broker at Cannon Trading can advise you of long term strategies that have economic and/or geo-political fundamentals behind them. Ask your broker for ideas. Engage him in discussions, and add this approach to your trading arsenal. Expanding your vision can lead to outstanding opportunities.
Whether you are using a buy only strategy in a put or a call, or a bull call spread (more info on futures options here), or a bear put spread, long term positions can add greatly to your futures trading profits. Expand your thinking from tick to tick trading in the mini index contracts to looking at the big picture over a wider view of the markets that are available to you as a client of Cannon Trading. Set aside some of your day trading capital to explore many of the long range opportunities that present themselves daily. It can be a good diversification to your day-trading approach. Your Cannon broker is ready to assist you with this expanded approach to the markets. Take advantage of this. Work with your broker and discuss the possibilities. Make this year, your best trading year ever. Bull and Bear opportunities are there to be turned into significant profits. Expand your thinking. Think about the big picture opportunities that exist.
One can "scalp" the markets in attempting to capture very small, quick profits.q
One can trade market "swings" that last one, two or several days and attempt to profit from moves of a larger nature.
And, traders can trade from a long term perspective, trying to secure profits from large movements in price over an extended period of time, which could be weeks or months in length.
All three styles have their proponents. All three have advantages and disadvantages. What is key is that the trader pursues the style of trading that BEST fits his or her personality, strategy and intended discipline.
-----------------------------------------------------------------
I personally feel that swing type of trading best fits my psychological profile. I am comfortable taking moderate, measured risks in an attempt to capture what I consider to be significant profits in percentage terms of my account equity. Other traders, especially on-line traders prefer to trade in and out quickly by "scalping" profits from the markets through the use of small, frequent trades. Discipline and adherence to a pre-planned strategy is critical in successful applications of both of these types of trading.
The remainder of this article will focus on the third approach to trading in the futures markets. Long term position trading. The pursuit of the homerun trade. The big hit. To capture a major move. This type of trade is what dreams are made of. To make a fortune in beans, or to catch a currency move the way that George Soros did years ago. NEEDLESS to say that just like any other method (scalping, swing etc.) the risk in trading futures is substantial and that only risk capital should be used. Past performance is not indicative of future results.
The favored tool for accomplishing this trade is the futures option, a derivative of the futures contract. Buying puts or calls either outright or on a spread basis is what we are talking about.
The advantages of using options for this purpose, to capture major moves are twofold. First, when purchasing a put (expecting lower prices to come) or a call (expecting higher prices in the future) the absolute maximum risk is a known amount. You can lose up to 100% of the purchase price of those options + the commission cost, but not a penny more. Secondly, random, daily volatility, which could stop out a futures position, since using stops on futures positions is a must, could prematurely stop out your position before the move has time to develop as anticipated. This occurrence is not a concern when holding an option contract. A temporary price movement contrary to the expected direction of the option trade, will not be a concern to the option holder. This is a critical factor in being able to manage a long term position strategy. Risk management is so vital in all speculative trading endeavors. Your experienced broker at Cannon Trading can advise you of long term strategies that have economic and/or geo-political fundamentals behind them. Ask your broker for ideas. Engage him in discussions, and add this approach to your trading arsenal. Expanding your vision can lead to outstanding opportunities.
Whether you are using a buy only strategy in a put or a call, or a bull call spread (more info on futures options here), or a bear put spread, long term positions can add greatly to your futures trading profits. Expand your thinking from tick to tick trading in the mini index contracts to looking at the big picture over a wider view of the markets that are available to you as a client of Cannon Trading. Set aside some of your day trading capital to explore many of the long range opportunities that present themselves daily. It can be a good diversification to your day-trading approach. Your Cannon broker is ready to assist you with this expanded approach to the markets. Take advantage of this. Work with your broker and discuss the possibilities. Make this year, your best trading year ever. Bull and Bear opportunities are there to be turned into significant profits. Expand your thinking. Think about the big picture opportunities that exist.
