Here’s what I’m thinking of doing:
Pick a future that’s been volatile lately
Buy an option on the future to increase the swing even further
Watch the swings, and if I’m up 25%-30%, close the position.
Would this work? I’m not interested in researching fundamentals or following technical indicators. Of course, I wouldn’t risk more money than I can afford to lose.
Trading indicators are best used along with money management and good risk control, using tesnical indicators alone will not enable you to ne a successful trader, the market is just too random
Related posts:
- What do they mean by fair value of futures and futures present value? How do they come to those figures?
- Trading Stocks based solely on Technical Analysis?
- How do I start my own fund that trades futures and options?
- Anybody have experience with currency trading?
- Futures and Fair Value in the pre-market?
- When the news says Futures are up, for a prediction indicator of probable gains in stock price for a given day
- Has anyone used Gorilla Trades for stock picking? If so, how has it worked out for you?
- what is really going on in the stock market?
- What are the rules on day trading in a futures account?
- Anyone currently doing any Forex currency trading?
Several years ago there was a commodity traded, maine potatoes. Every year for something over two-dozen years, the price would go up in the middle of January through early February. Information was not as free back then, I could track causes better today on the Internet. So I had some money and practiced trading in corn, making a little bit while getting the ropes. The target was this, the smallest increase was 8 cents a pound, 50,000 pound contracts. I caught it on a down tick and felt like a surfer catching a wave. Unfortunately, it was a tsunami. There were several millionaires who had also spotted the trend and they thought they could buck it. So the price went limit up, trading stopping after the first couple of minutes, doing this for a few days, then limit down, again stopping trading after a few minutes into the next trading day. I got a margin call, but it was for more money than I had, so the brokerage confiscated my position. When the dust settled, the price had indeed gone up as I antcipated, but I was trapped out, unable to profit from it. For that matter I was paying off that debt to the brokerage firm for years, instead of paying off my mortgage, which is what would have happened if those guys hadn’t been greedy. Meanwhile, it bankrupted something upwards of 100 rich traders who had tried to turn the market, and sent something like 60 to prison.
This doesn’t happen all the time. Just be careful, you can lose more than you put in, although trading the option MAY limit that. For instance, even in stock options, if you sell a naked option and things go against you and someone calls that option and you haven’t had a covering option to cancel, you are on the hook for supplying the shares. Be careful of trading too close to the expiration. I remember positioning for one thing expected to go up, and by the time the events began driving it up, my option was close to expiring, I got almost nothing out of it.
A good plan is a wonderful thing. But with commodities and commodity options, there is still uncertainty, and definitely danger.