aging in the home remodelers fox river grove building a mudroom addition lake barrington anderson remodeling hainesville bci acrylic hawthorne woods th remodeling .. Chicago Drug testing

How Commodity Trading Differs from Stock Trading

There are major differences between trading stocks and trading futures. While stories of fortunes made or lost overnight on the futures markets are largely untrue, the futures trader, if using a sound trading system, can usually make more money on the futures market and make it much faster. However, if that trading system is not sound the trader can have greater losses.

This is because futures contracts are highly leveraged. Margins (the deposit required) on futures contracts are much less than for stocks, as low as 3% on some futures contracts compared with up to 50% for stocks. As well, futures investors are not charged interest on the difference between the margin and the full contract value.

The margins for futures contracts act more as a performance bond or good faith deposit whereas the margin for stocks is more of a loan. Although the margin on futures contracts is quite small, it rides the full value of the underlying contract as that contract rises or falls, thus providing the leverage mentioned earlier.

Commissions charged by futures brokerages are normally much less than brokerage commissions for other investments.

Futures markets use the open outcry (auction type) method of trading ensuring very public, fair, and efficient markets. Plus, it is much harder to trade on inside information as so many variables affect the markets. Also, futures markets are very liquid. Transactions can be completed quickly, which lowers the risk of adverse market moves

If you own stocks you are an owner of the company. This allows you to share in the company's profits, and losses, through dividends, and increases or decreases in the stock's value. It also gives you certain voting rights with the company. However, a company can go bankrupt, leaving you holding worthless stock.

When you buy and sell futures you are only entering into a contract and don't really own anything. What you have is an agreement to buy a commodity or financial instrument (wheat or Treasury Bonds for example) at a specified price at a certain date in the future.

The person on the other side of the transaction has agreed to sell you that commodity or financial instrument at that specified price by the specified date. If you sell a futures contract prior to that date you have offset your position and have either a profit or loss on the trade.

The stock you bought 3 years ago is the same stock you can buy today. Futures contracts, on the other hand, have very limited lives. They are traded in a regular series of contract months referred to as delivery months.

Futures contracts have expiration dates after which no further trading for that month can take place. The September corn contract you traded last year is not the September corn contract you are trading this year. In fact last September's corn contract no longer exists.

Many futures contract months of the same commodity trade simultaneously on the market, sometimes even years into the future. The current contract is called the front month and the other contracts are called the back months. They are called back months even though they are for future months.

For example, corn trades for the months of January, March, May, July, September, November and December. Suppose today's date is August 4, 2000. The current contract month for corn would be September 2000 and so is called the front month. The months of November and December 2000, January 2001, March 2001, May 2001 and July 2001 are back months even though they are in the future and even flow into the next year. (This may sound confusing but its not ...really)

All of these months can be traded at the same time although most of the trading activity takes place in the front month.

When the current month expires the next contract month becomes the front month and so on.

Rob Hall is a successful futures trader, President & CEO of his own investment firm, and international author. His books on learning to trade futures markets are distributed through Sumas International Sales Ltd. View them at http://www.futuresopps.com/Comm.htm

In The News:

Dont Spend Another Dollar on Business Opportunities Until You Read This

With an insecure job market, overworked employees, insufficient retirement savings... Read More

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two... Read More

The Problem With Hedge Funds

Are hedge funds a suitable investment for you? Hedge funds... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Size Counts!

What the heck am I talking about?It is often said... Read More

E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software

I mean it when I say that. While plastic silverware... Read More

401K-itis

Are you one of those many people who dread reading... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Swing Trading Strategies

Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Online Investing & Online Stock & Share Trading: Difficulty in Taking Stop Losses in the Market

This is an extract of an article which was first... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

Bottoms Ups

If you have talked to a stock broker or financial... Read More

Trading Education: The Best of Both Worlds!

I made my very first investment in the stock market... Read More

Stealth Bull

If you have been watching the stock market at all... Read More

The Skinny on Mutual Fund Investing

Mutual fund investing is a lot like Thai cooking. Everyone... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Inertia

One of the basic laws of physics is that a... Read More

Stock Trading Success

The ABC's of Stock Trading SuccessStock trading success...why is it... Read More

Living Trust Investing: Income Considerations when the Grantor Dies

A common problem I often see when working with living... Read More

No Load Mutual Funds or Exchange Traded Funds (ETFs)?

If you are fed up with early redemption charges and... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

used street lights energy saving led light bulbs Pete's produce ..
used street lights energy saving led light bulbs Pete's produce ..