How To Determine Which Futures Contracts To Trade
Author: Beau Penaranda
The main reason why is that the markets move very quickly and many new commodity traders trade without a plan or do not have the discipline to stick with that plan. It also can create trading on emotions or trading in manner that is erratic which can also cause "over trading".
Yes, you can make a lot of money fast trading the emini’s, but you can lose it just as fast. Leverage is a double-edged sword and if you do not use it correctly, you’ll get cut more often than taking profits steadily out of the market.
There are many attractive reasons to trading the emini’s. Mainly the low day trading margins, along with very low commissions. However neither one of these reasons can actually make you a better commodities trader and it can leave with bad habits.
Here’s the four best markets to trade if your account is $5,000 or less:
- Live Cattle – live cattle is one of my all time favorite markets to trade futures in. It is lively enough to make decent money via a day trade, but slow enough to allow newer traders to develop their technical skills and trading plan to help them succeed; a typical margin for trading live cattle is about $1200-$1650 dollars depending on your broker.
- Soybean Oil – not as volatile as bean oil’s cousins (meal and beans), but volatile to move enough to make a good profit within a day trade; standard margin is between $1600 – $2200 dollars.
- Lean Hogs – hogs is another market that I trade frequently because it acts much like cattle does; really the only difference between the two is hogs have a lower margin; typical margins for trading hogs is $900 – $1300 dollars.
- Sugar#11 (world sugar) – sugar doesn’t move as fast as the others however this commodity trends well and when it develops new trends it can move in a hurry; typical margin for world sugar is $700 – $950 dollars.
Trading one contract at a time is a good way to start. Using one contract, I frequently can make anywhere from $250 – $1200 dollars per trade. This is using just one contract! As your account grows you can easily move up to multiple contracts and compound your profits even faster!
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[...] Beau Penaranda wrote an interesting post today onHere’s a quick excerpt How To Determine Which Futures Contracts To Trade January 7, 2009 | By admin In Developing A Trading Plan, Futures For Newbies | Comments(0) I see many ebooks, courses and other software gadgets all geared towards trading the E-mini’s. While I love to trade the electronic markets, for a beginner I would recommend not trading them while you are learning. The main reason why is that the markets move very quickly and many new commodity traders trade without a plan or do not have the discipl [...]