What is Traded for Managed Futures Accounts?
As we have mentioned in prior articles, within just 30 years, managed futures has transformed from a small niche into one of the biggest investment markets in the world. With commodity prices skyrocketing and yields higher than ever, smart money is leaving the equity markets and heading straight for the managed futures industry.
You may be thinking, this sounds interesting, but what’s actually traded in a managed futures account? Well, in this article we’ll answer that question and more. To make things simple, we’ve listed the main sectors of the futures industry, and the primary markets that are traded. This will give you a basic understanding of managed futures, and the popularity of the markets within it.
List of Futures Markets
Energy Futures: This is one of the most actively traded sectors in the managed futures industry. The main energy futures are crude oil, heating oil, gasoline, and ethanol.
Metal Futures: With the recent financial crisis and high price of gold, metals have become very popular amongst managed futures traders. The main metal futures are gold, silver, copper, and platinum. With gold prices at new highs, most traders are joining in to take advantage of growing liquidity.
Grain Futures: The grain markets have moderate volume, and are far less popular than metal, energy, and stock futures. The commodities which are considered grain futures are wheat, corn, soybeans, oats, and rice. Though some managed futures traders specialize in this area, grain markets are far more volatile.
Currency Futures: In the managed futures market, currencies are very popular due to the wide number of pairs to choose from. Some examples of currency futures are the U.S. Dollar Index, British Pound, Canadian Dollar, Swiss Franc, Japanese Yen and Euro FX.
Stock Index Futures: This sector of the managed futures industry is the most popular of all. In fact, once stock indices became tradable, the futures industry exploded almost overnight! Some examples of stock index futures are the S&P 500, Nasdaq 100, Dow Industrials, NYSE Composite, Russell 2000, and the Nikkei.
Meat Futures: This is a sector of the managed futures market which very few traders specialize in. Due to low trading volume, meat futures prices can be quite volatile. Some examples of meat futures are live cattle, pork bellies, lean hogs, milk, and butter.
Soft Futures: This is another sector which few managed futures traders specialize in. Though there are some who have success, the markets in this sector can be very volatile. Some examples of soft futures (“softs”) are coffee, sugar, cocoa, lumber, and orange juice.
As you can see, there are a number of different markets that managed futures traders can choose from. If you want to “trade breakfast”, you can invest in orange juice and coffee futures. On the other hand, if you want to trade equities, you can invest in the S&P 500, Dow Index and more! Either way, whether you’re an investor or trader, the futures market is bound to have something that interests you.
Though the information in this article may seem simple, it’s very important to understand the markets before investing in managed futures. If you’re an investor, this will allow you to ask the right questions, and better define your risk before moving forward. In contrast, if you are an aspiring trader, understanding the different futures markets will allow you to find your niche, and shorten your path to success.
Remember, whether the topic seems basic or complex, education is the key to managed futures success! Take a few hours and get informed on managed futures, it could be break you were waiting for…
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