Ron Walker on futures...
7/28 Headlines + Understanding Futures
"Many brokers offer future contracts. The emini is a smaller version of the larger futures contract. Currently you can go long or short on a contract for $4375 per contract. Each point that the S&P 500 futures move is worth 50 points, and say the S&P 500 is at 1354. So by taking going short on one contract I control $67,700 (price of S&P 1354 X 50 = 67,700). So futures are heavily leveraged. I'm only having to come up with 6.5 % of the position $4375 is approximately 6.5 % of $67,700. So the advantage is that you can control a large position sized with very little money.
Taking several contracts before a huge decline can add up to a handsome profit in a short amount of time. Although I don't take a position all at once, I accumulate as it proves to be correct. If I'm going to short 3 contracts, I start with one and add a second if it proves correct, and then another after that.
Say I take 5 contracts and the market drops 150 points, like it did from the March high to the June low. The trade would produce a 37,500 profit (150 points X 50 = 7,500 profit per contract X 5 contracts = 37,500.
Futures are very risky. You don't want to play futures until you fully understand them. It takes a lot of experience to trade them. So I would suggest reading some good books on the subject. I like trading futures for dummies. It is well written. I offer this at my book store.
I use our swing trade and momentum signals to trigger my trading signals for futures. That helps keep me on the right side of the trade. Timing is everything with futures because they trade almost around the clock.
To look at a futures chart, the symbol is /ES. You can only see it at a site that offers that data. Think or Swim through Ameritrade offers these charts and allows you to trade them. Remember, futures trade nearly 24/7 so there are price fluctuations while the market is closed. Futures close at 4:15 p.m. EDT on Friday, and then reopen at 6 p.m on Sunday, other than that they trade nearly around the clock, only stopping for a few breaks."
