How to Make Consistent Profits

How to Make Consistent Profits
Trading Futures Part III
A chain of traders are trading the stock indexes related the FTSE, the DAX, the S&Ps, NASDAQ and the DOW, but rather than handling futures they are using spread betting firms. The reasons for using these firms is that they require very monkey amounts of capital to get started, a trader can trade very small amounts ( uniform £1 a point on FTSE as opposed to £10 for FTSE futures ) and these firms make opening an account so untroublesome. I understand the lure of being able to open an invoice with very little money and trading small amounts, but I have some staid considerations about using spread betting as a realistic hook for professional trading. The two major selling points are no commissions and no capital expands tax. There are frequent different costs to trading, commissions are one and the spread is another ( especially when you have to trade at the market as you do with spread betting, with futures you have the choice of joining the advance or the offer ). Commissions are important for an active trader and as an slaving trader you can get them very gloomy, but lets assume they are £8 per round turn for futures and lets assume that the spread in FTSE futures is an accepted of 2 points. If the spread with a spread betting firm for FTSE is 6 points and assume that we are trading £10 a point we can compare the two trading vehicles. Last term ( written Nov 2001 ) I made an average of 2. 42 points per contract traded and I traded 48 times. That is, for each contract I bought and sold I specious £24. 20 before commissions, assuming my commission rate is £8, I made a profit of £16. 20 per burden traded, which is £777. 60 net perk if my average size per trade is one contract. Had I had the same success trading with a spread - betting firm, with a 6 - point spread, I would have wandering £1718. 40! Any more I would rather pay tax on a assistance that no tax on a loss. There is one other unqualified important reason for trading the futures market rather than a non - exchange traded market such as those offered by spread betting firms. The futures markets are exchange traded and this agent that they are in truth transparent, i. e. everything is visible and large the table, I can see every single trade that happens. Visualize the trading pit, as it used to be traders stood physically in a ring trading with each one other. When a trade is entered, the order goes into the pit and is represented there, free to be taken by chunk other market participant. We easily can all see about what is happening, we trade with the equal information and with the similar advantages / disadvantages. Now assume you are a trader who can only trade with one broker in the pit, you can trade as much as you like, any size you close, but he sets the spread he is willing to offer you and you have to trade at market ( i. e. buy at his offer and sell at his advance ). This broker doesn’t hunger to loose money, naturally, so he always makes his spread wider than the real market spread, he again, naturally, puts his interests before yours, so he won’t always be willing to trade when the market is moving fast and he is provisional. Remember whenever you make money he loses, so he is sure-enough careful to maintain his advantage at all times. Who wouldn’t feel like to be in this brokers position ( he isn’t in reality a broker, though he claims to be )? When you trade with a real futures broker, all the broker does is facilitate your trade; he gives you the aptitude to have you orders represented in the pit. A real brokers organization is that they bring off your order as efficiently as possible, that is their afafir, they do not revenue positions and they do not take the opposite any to you. They naturally want you to make money due to by making money you convert a client who will stay to pay them commissions. Trading with a spread betting unrelenting is absurdly held dear, spread betting firms are like amusement arcades, they can be boisterous, but to imagine you are going to make your living from slot machines is illusory.

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