Futures Trading & your returns on Investments

Futures Trading & your returns on Investments

Futures contracts are financial assets just like stocks and bonds, but with some important differences. These differences are what make futures such an appealing investment for traders. Many tend to think that futures are too complicated to understand and consequently, miss many opportunities by not trading them. Money is made if you "buy low and sell high". One of the most wonderful things about futures is that you can sell them before you even buy them. So our simple rule can also read: Money is made if you "sell high and buy back low". Keeping this simple rule in mind puts you on your first step to becoming a successful futures trader.

What Are Futures?What Are Futures?

Our challenge is to anticipate price movements correctly and make the appropriate trade. If we expect the prices to rise, we should buy futures and if we expect prices to decline, we should sell it. If our expectations turns out to be correct, then we will make money. If not, our Stop loss will protect us from losing heavily. Realistically, it is virtually impossible to be right all of the time. In fact, many traders are wrong more often than right. BUT, they can still be Successful traders. Managing risk is the KEY here.

The StrategyThe Strategy

In spot trading we have to close the buy/sell open positions on the same day or settle the trade with cash while in future trade we can hold the positions till the expiry of the contract. The time period is generally 2-3 months.

Difference between Spot and Futures trading

Difference between Spot and Futures trading

We have to Pay only a part of our money as Initial Margin of the total contract value. For example the contract size of Gold is 32 Ounce (1Kg). The contract value is 21760$ (680 X 32). But We pay a Initial Margin of 1000$ to Trade 1 Lot of Gold

(32 Ounce) which is costing 21760$. This is the advantage of Margin Trading.

Concept of Margin TradingConcept of Margin Trading

An ExampleAn Example

Market Opens at 08.30 AM in the Morning…

Gold price is increasing. So speculation is to Buy…

10:30 AM we decided to buy 1 lot of Gold at a price of 680$....

The margin amount required to buy 1 Lot of Gold is 1000$...

Total Price of 1KG of Gold is 680 X 32 = 21760.00 US$...

4PM the market moves upward by 5$ and is quoting at 685$..

So we are in a profit of 5$, which in total is 5 X 32 = 160 US$..

We now have option either to sell Gold and take the profit or wait to

get more profit if market is continues moving Upward……

Buy OrderBuy Order

An ExampleAn Example

Market Opens at 08.30 AM morning… Gold price is decreasing. So speculation is to Sell….. 10:30 AM we decided sell 1 lot of Gold at a price of 680$...... The margin amount required to sell 1 Lot of Gold is 1000$... Total Price of 1KG of Gold is 680 X 32 = 21760.00 US$... 4PM the market moves downwards by 5$ and is quoting at 675$.

So we are in a profit of 5$, which in total is 5 X 32 = 160 US$.. We now have option either to buy Gold and take profit or wait to

get more profit if market is moving Downwards

Sell OrderSell Order

Make Huge Money in Futures MarketFutures can be "shorted", or sold, without actually owning anything--unlike stocks. The "buy and hold" strategy of stock trading permits an investor to profit only when his stock goes up in value. Futures allow a trader to profit when the value of the underlying instrument (gold) declines. Whether the market is up or down, you can Profit.

Make Money in Futures MarketMake Money in Futures Market

Advantages Margin TradingAdvantages Margin Trading

Well, It gives you financial leverage. Your returns are increased to 20 times as compare to cash purchase by paying

full amount of money, if you are paying 5% margin of total value of contract.

As you are investing your hard earned money we wish you to do a little bit of home work before you see your money growing

Study Fundamentals. Like demand and supply position, future outlook of economy, historical data of the commodities.

Economic / Political events that can affect your Investments. So do not ignore the leading economic indicators providing direction to economy, Instability in the region as Iran going nuke, North Korea going for missile testing also affects the movement of commodities.

How to Invest as I am new to Commodities

How to Invest as I am new to Commodities

Crude oil demand and supply Position, US economiccondition, Weather situation in US like hurricanes season is approaching in August and September.

EU economy indicators also play significant role.

Co- relation between Gold and Dollar & Gold and Crude oil can not be ignored.

Other Factors affecting Price Movements

Other Factors affecting Price Movements

Gold Chart In last one year 2006

A good, successful trader needs the following traits, either you have it or you have to develop it.

First and foremost is DISCIPLINED trading. Always have a affordable “Stop Loss” Be Patient……. Don’t over Expose your Equity…. Control over sentiments Fear and Greed, (these two

are the biggest enemies here) Don’t be Emotional….

Tips to be SuccessfulTips to be Successful

Analyze the average price range of commodity in which it moves.

Analyze the effects of current news and events Watch for direction from daily Moving averages and

other indicators. Watch for trend and move with the trend Put a strict stop loss.

Short term Strategy for day tradingShort term Strategy for day trading

Collect the account opening form from CAPITAL FOREX Fill complete details in the form. Arrange the Supporting documents. 1 Passport size photograph Copy of passport with residence Visa page Recent Utility bill, tenant agreement, telephone bill or

DEWA bill any of these documents.

How to open a trading account with CAPITAL FOREX

How to open a trading account with CAPITAL FOREX

Thanks!Thanks!

THANK YOU for your Valuable Time.

Explore the new world of INVESTMENT Happy Trading

THANK YOU for your Valuable Time.

Explore the new world of INVESTMENT Happy Trading