The practice of ”day trading”, or buying and selling primarily within one trading session or trading day is, at best, risky business – particularly involving what are known as “futures”. The process has less to do with “investing” and more to do with gambling, especially if one is not using a sound day trading futures system. Many experienced day traders often joke that a novice has better chances at a Las Vegas Blackjack table than in a “futures” pit of the Chicago Board of Trade.
“Futures” day trading is very popular because a relatively small amount of cash can “leverage” a relatively large position in the market. But, as with all things, the better the chance of higher profits the riskier the investment, making a sound futures day trading system essential.
“Futures contracts” are bought and sold by day traders hoping to make a profit in the range existing between the selling price and the buying price of the contracts that guarantee a stock or a commodity price in the future. Yet, the day traders are usually “In and out” so fast that they seldom ever own the actual stock or commodity, but merely the value of the future price contracts.
Company stocks are commonly known. However, many novice traders do not realize that commodities can range from precious metals, like gold and silver to oil, gasoline and natural gas to agricultural products such as hogs, cattle, corn, wheat and even orange juice.
The best futures day trading system is really as individual as the trader. “Averaging” or buying contracts in increments as they become most expensive will “average” out the overall cash exposure by the trader to a level somewhere between the highest contract price and the lowest contract price paid. From that point, the trader determines at what price he or she must sell their futures contracts in order to cover broker common fees and still make a reasonable profit. The danger lies in the fact that the price could keep going in the direction the trader was paying all along, thus making the reversal for the sell, and therefore, the profit less likely.