STOCK BUBBLES

Benefits of trading index futures compared to stocks

In the world of trading there many different instruments to choose to trade. I’m going to talk about why I prefer index futures to most any other vehicle, especially stocks. I am a part time trader in my 40s, I also go to college part time and program software the rest of the time from home. I have been trading in the markets now for 15 years and much of what I have learned is based on personal experience and trial and error. I wish I had more guidance when I first started trading, either from personal mentors or video programs but I didn’t think to invest in those at the time. So my education comes from hard knocks which is actually a pretty good thing, a slower method of learning but good. When I first started trading I went with the method that seemed everyone did and that was to invest in stocks. Index futures was a term I heard of but I thought was only in the realm of the elite professional wall street trader. I had no idea what an index future was. So initially I traded stocks by only going long and hoping for the best. I started about the time the tech bubble began to grow and so it seems like things were really easy. I’d pick a random stock A that I saw on the news, and within a week or two it had practically doubled. In some cases I had one stock (BEOS) that double in one day. As my account grew I thought this was about the easiest thing in the world. Unfortunately the tech bubble burst and everything came down. I was stuck into trading only in one direction and that was to go long because my trading account was big enough yet to maintain the kind of balances required for a margin account that would allow me to trade stocks short. I hadn’t learned about index futures yet and now I was getting really frustrated because as the market tanked, people were still making easy money by just shorting everything. Yet I had to sit on the sidelines and only go long and of course, all my long trades were losers and my account began to shrink back down. Index futures are a vehicle that is a futures contract based on the average price of all the stocks that make up that index. Some index futures contacts contain thousands of stocks. One benefit of index futures is that the price doesn’t whip around so badly compared to the price of an individual stock which is subject to wild price fluctuation for things that have nothing to do with the stock’s fundamentals at all. Index futures absorb those price spikes of individual stocks into the total average of the index so you are not left at the mercy of one particular stock’s price, but instead the index future is a nice large average of many stocks. But the best thing that I liked about switching to index futures, is that I could now go short as easily as I could go long on a stock, but without having to maintain the extremely large account balances required to day trade stocks on margin. With just a small amount I could have the ability to short the market index futures as easily as I would go long and therefore be able to make profits no matter what direction the market was soaring. I am no longer on the sidelines and I don’t have to maintain large margin accounts for the privilege to do that. An excellent resource for learning more about index futures and various trading methods and even auto trading systems specifically for index futures, you can visit www.tradingindexfutures.info and get started learning about how you can profit easier from them than stocks.

Benefits of trading index futures compared to stocks

In the world of trading there many different instruments to choose to trade. I’m going to talk about why I prefer index futures to most any other vehicle, especially stocks. I am a part time trader in my 40s, I also go to college part time and program software the rest of the time from home. I have been trading in the markets now for 15 years and much of what I have learned is based on personal experience and trial and error. I wish I had more guidance when I first started trading, either from personal mentors or video programs but I didn’t think to invest in those at the time. So my education comes from hard knocks which is actually a pretty good thing, a slower method of learning but good.

When I first started trading I went with the method that seemed everyone did and that was to invest in stocks. Index futures was a term I heard of but I thought was only in the realm of the elite professional wall street trader. I had no idea what an index future was. So initially I traded stocks by only going long and hoping for the best. I started about the time the tech bubble began to grow and so it seems like things were really easy. I’d pick a random stock A that I saw on the news, and within a week or two it had practically doubled. In some cases I had one stock (BEOS) that double in one day. As my account grew I thought this was about the easiest thing in the world.

Unfortunately the tech bubble burst and everything came down. I was stuck into trading only in one direction and that was to go long because my trading account was big enough yet to maintain the kind of balances required for a margin account that would allow me to trade stocks short. I hadn’t learned about index futures yet and now I was getting really frustrated because as the market tanked, people were still making easy money by just shorting everything. Yet I had to sit on the sidelines and only go long and of course, all my long trades were losers and my account began to shrink back down.

Index futures are a vehicle that is a futures contract based on the average price of all the stocks that make up that index. Some index futures contacts contain thousands of stocks. One benefit of index futures is that the price doesn’t whip around so badly compared to the price of an individual stock which is subject to wild price fluctuation for things that have nothing to do with the stock’s fundamentals at all. Index futures absorb those price spikes of individual stocks into the total average of the index so you are not left at the mercy of one particular stock’s price, but instead the index future is a nice large average of many stocks.

But the best thing that I liked about switching to index futures, is that I could now go short as easily as I could go long on a stock, but without having to maintain the extremely large account balances required to day trade stocks on margin. With just a small amount I could have the ability to short the market index futures as easily as I would go long and therefore be able to make profits no matter what direction the market was soaring. I am no longer on the sidelines and I don’t have to maintain large margin accounts for the privilege to do that.

An excellent resource for learning more about index futures and various trading methods and even auto trading systems specifically for index futures, you can visit www.tradingindexfutures.info and get started learning about how you can profit easier from them than stocks.

For more information visit: Trading Index Futures