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Home » MANAGED FUTURES

Futures Trading, Profit in Good or Bad Markets

futures-trading-markets-tradeWouldn’t it be nice if your portfolio didn’t depend on the stock market? What if everyone was losing money in the markets, but you were profiting hand over fist? How does the idea of getting rich during the financial crisis sound?

Well, if you invest with the right futures trader, these are just a few of the benefits you can experience.  Whether Dow futures are peaking at new highs or testing new lows, it really doesn’t matter. The reality is, profit is determined by market analysis, not the growth of equities.  The amazing thing is, some managed futures traders made 100%+ during the financial crisis. In contrast, the rest of the world lost 40%+ trusting “safer” investments.  Isn’t it ironic.. don’t you think?

In this article, we will explain the concept of buying and selling positions in the futures markets.  This will help you to understand how you can trade futures profitably in both bull and bear markets.  First things first, let’s define the term “short-selling”. This will give you the basics, explaining its importance to you and the futures markets.

Short-selling (“going short”) is selling commodity futures in anticipation the price will decline
.  If you “go short” and the market declines, your profits are determined by price difference and the leverage you apply. On the other hand, if you “short” the market and prices rise, you’ll begin to lose on that futures position.

For example, if you owned one “short” position in crude oil futures and prices moved from $81.19 to $79.19, you would earn $2 (200 “ticks”).  Though this trade usually earns $2,000, if you apply additional leverage, it can be far more. Now that you understand how to “short-sell” futures, let’s teach you about “going long”.

Buying (“going long”) is purchasing commodity futures in anticipation the price will rise. If you “go long” and the prices rise, your profit is determined by the price difference and leverage you apply. If you “go long” and the price for that commodity declines, you will begin to lose on that trade. Once again, your losses will depend on price difference and leverage.

For example, if you owned one “long” position in crude oil futures at $81.19 and it moved to $83.19, you’d have $2 in price movement. Once again, this translates into $2,000+ in profit. Let’s face it folks, it’s really this simple.  Why do you think managed futures has become one of the biggest investment markets in the world?

You may be saying to yourself, “This sounds easy, but what if you’re not sure what direction the market’s trending?  Well, that’s where it gets far more advanced. By studying fundamental and technical analysis, managers can analyze the trading environment. If you’re a good trader, you’ll benefit from big market swings, protecting yourself with “hedged” positions if needed.  Also, if you are even more experienced, you can purchase options on futures contracts to define your risk up front. In most cases, futures traders use techniques just like this to “cover” or “hedge” their positions, lowering their yields in exchange for stability.

In summary, whether the traditional markets are volatile or calm, futures trading can produce high yields. If you find a good trader, just as the CTA index has shown, managed futures can be far safer than equities.  Keep in mind, futures trading isn’t about market growth, it’s about opportunistic trade execution.  Though you can a lot lose money from a bad mistake, you can also double your account in a week…

InsideTrade LLC Staff
Phone: (949) 444-2111
Info@InsideTradeLLC.com

5 Comments »

  • Jack Pierce said:

    That helped me get some of the basic points, I appreciate it

  • How Do I Open a Managed Futures Account? | InsideTrade LLC said:

    [...] and they have a large amount of money under management (50M+), then you may have found the right futures trader. In contrast, if they a small amount of assets under management (less than 10M), whether the yields [...]

  • Forex said:

    Trading in futures is something ideal to make money in bad and in good market.

    Forex

  • The Ideal Managed Futures Investor | InsideTrade LLC said:

    [...] reading through some futures trading articles, you may be saying, “this looks exciting, but is managed futures right for me”? Well, [...]

  • Normand said:

    Hi,

    My wife and I are looking to sell our small hotel. We’ll then have an investment portfolio of US$1,350,000.00.

    We want to use the returns of this portfolio to enjoy a nice retirement.

    My question is the following (and I know it’s not an usual one!): would it be possible to have a balanced and diversified portfolio containing only managed futures programs?

    I had friends who lost so much in 2008 with their stocks portfolio that I’m very tempted to look at other options!

    I’ve so far identified 6/7 programs that seems to me “balanced and diversified”.

    Of course, I’ll need the advise of a broker (or maybe more than one!) to get an expert feedback on my choices of programs.

    At this point, any thoughts will be welcome!

    Thanks!

    Normand

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