To some, living in Phoenix, AZ the stock market may seem as mystical as voodoo, or are unpredictable as the weather, especially something with the mysterious name “futures.” But in reality futures trading, while complex, can be very rewarding, especially for those that make smart, calculated risks and know how to manage their investments wisely.
If you’re thinking of futures trading in Phoenix, AZ there are a few basic tips you should be following to get ahead. But first, the basics.
What’s Futures Trading?
A future is a class of trading known as a “derivative,” where the price of futures is derived, that is dependent and calculated, based on something else, such as commodities like wheat or oil, or even stocks like Amazon or Ford. Futures are based on an agreement to buy a set amount of an asset at a specified price and date. So rather than agreeing to buy 10000 shares in Apple today at the current price of $120 per share, you agree to buy 10000 shares of Apple a year from now, at an agreed price of $100 per share.
The most important tip when it comes to trading in futures is to make sure you understand the market upon which your futures are based. If you trade in currency futures, study the currency markets, understand what economic and geopolitical forces shape the rise and fall of currency value. If you trade in commodities futures, understand what raises and lowers the price of wheat, or gold, or petroleum. If you trade in technology futures, understand the major players in the market, their projects that may yield innovations, and their executives that may help or hurt a company’s fortunes by retiring or defecting to another company.
Know When To Cut Your Losses
One of the biggest errors that futures traders make is being stubborn about refusing to acknowledge when it’s time to quit. If the price of an asset is dropping, some traders will continue to hold onto that asset, convincing themselves that there will be a rally and that the price will rise again, and they will eventually reap a return on their investment.
This type of thinking only makes sense if, as with real estate, you’re willing to hold onto investments for potentially years. With something as volatile as the stock market, it’s often better to set your own “stop loss” point, where, if the price drops below a certain point, you automatically sell the stock and minimize your losses, rather than continue to watch those losses grow as you hold onto assets whose value may never recover.
Always Think Independently
It’s easy for traders in Phoenix, AZ to chase trends, but it’s important not always to be a follower. Don’t just keep switching investments and interests based on the latest article you’ve read in the business news. Cultivate a specific interest and knowledge, become more familiar and in-depth with your commitment to your investments. When you think for yourself, and focus on specific goals, rather than chasing the latest hot trend, such as Cryptocurrency, you stand a much better chance of not being victimized with losses when the bubble bursts on a trendy market.