Futures trading, for many years the domain of professional fund managers and harried, hand-waving pit traders, was long considered either too risky or too sophisticated for the average investor. However, due to current technology that capitalizes on formerly inaccessible data and research, this vast trading arena holds great promise for those who seek to leverage small investments into substantial gains. In order to profit, traders need to know about the specific types of analysis, technology, and patterns that can lead to success. Filled with practical tools and techniques for understanding and prospering in the world of futures trading, Profit in the Futures Markets! shows how to use this information to your best advantage. In addition, you will discover how to improve your trading strategies by understanding and building upon your own style and developing a specialized plan for success based on your individual needs and abilities. Investors interested in expanding into the potentially lucrative world of futures need look no further than this easy-to-read, insight-filled guide. Debunks the myths that until recently have prevented many individual investors from trading in the futures markets -Covers virtually all important aspects of the subject, from the mechanics of trading to advanced strategies and techniques, including futures options and online trading -Reveals the importance of futures as an essential tool for capitalizing on price swings and market volatility -Instructs on discipline and money management - How to trade like a pro - Illustrated with numerous charts and graphs
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“Profit in the Futures Markets! is a wonderful compendium of facts, history, and trading hints that even the veteran can learn from. It's one of the best books I've ever seen on the futures markets!”
Chief Technical Strategist, Morgan Stanley
“This exceptional book fast forwards the learning curve and will help prevent the losses and the negative experiences a trader typically goes through in the first years of learning. Reward yourself by studying the success model of this master teacher."
Adrienne Laris Toghraie
Trader's Success Coach
Author of The Winning Edge books for traders
“Are you on the short list of people who can succeed in the difficult game of futures trading? If you would like to find out, this book is a great place to start. Bernstein teaches the first-time trader the language of the market. He also saves readers a lot of time, money and anguish by describing common pitfalls to avoid as well as good practices to adopt. You wouldn't perform surgery without training; don't trade futures without an education.”
Robert R. Prechter
President, Elliott Wave International
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Table of Contents:
Common Misconceptions about Futures Trading
Evolution of the Futures Markets
More Recent Developments
The Single Stock Futures Market
What Is Hedging?
How a Hedge Works
How Do the Players Benefit?
Why Trade Futures?
What about Risk?
Additional Uses of the Futures Markets
Part One: Getting Started: Myths and Realities of the Futures Markets
Chapter 1: Building Blocks and Basics
Complexity and Simplicity
Grist for the Mill
Information: Is Less More?
Define Your Objectives
Can You Make the Commitment?
How Will You Achieve Your Objectives?
Not a Get-Rich-Quick Scheme
Take the Test
Should You Borrow Your Starting Capital?
Pooling Your Funds
Attain Your Objectives by Stages
Bank Some Profits
Other Important Issues
Should You Trade Alone or with a Partner?
Should You Trade for the Short Term, Long Term, or Intermediate Term?
Should You Take a Fundamental or a Technical Approach to Market Analysis?
How Much Risk Do You Want to Take on Each Trade?
Selecting a Broker
Are Futures Options Your Answer?
Chapter 2: The Two General Approaches: Fundamental vs. Technical Analysis
Does Your Analytical Approach Really Matter?
Supply and Demand
Some Shortcomings of Fundamental Analysis
Its Value in Spite of the Limitations
The Pragmatics of Fundamentals
Technical Trading and Analysis Systems
Technical Analysis and Short-Term Trading
Some Limitations of Technical Analysis
Advantages of Technical Analysis
Hybrid Approaches to Market Analysis
What's Best for You?
Chapter 3: What You Should Know About Trendlines
Trading Using Trendlines
Trendline Trading Rules
Using Trendlines on Intraday Data
Chapter 4: What You Should Know About Cycles
What Is a Cycle?
Many Markets, Many Cycles
Trading Using Cycles
Variability of Cycle Lengths
Cycle Trading Rules
Limitations of Trading with Cyclical Indicators
Chapter 5: What You Should Know About Moving Averages
How Moving Averages Give Buy and Sell Signals on Price Charts
Pros of Using Moving Averages
Cons of Using Moving Averages
Rules for Trading Using Moving Averages
Chapter 6: What You Should Know About Seasonality
Time Frames for Seasonals
Seasonal Price Tendency Charts
Seasonality in Futures Prices
Daily Seasonal Futures Tendencies
Seasonality in Futures Spreads
Implementing Seasonal Trades
Chapter 7: What You Should Know About Computers and Computerized Trading Systems
Reinvent the Wheel?
Computerized Quote Systems
Pros and Cons of Trading Systems
Buying versus Developing a Trading System
Questionable Ethics and Questionable Results
Fallacy of the Vast Historical Database
The Selective Data/Selective Market Trick
What's the Drawdown?
Stable versus Unstable Systems
Dealing with Limit Moves
Computerized Testing of Trading Systems
Why Test a Trading System?
Test for Key Results
Part Two: Discipline and Trading
Chapter 8: Discipline: Your First Key to Success
What Is Discipline?
Why Discipline Is Important in the Quest for Success
Doing Your Homework
How Lack of Discipline Can Become a Chronic Problem
How to Improve Your Discipline
The Self-Evaluation Checklist
Chapter 9: The Art of Contrary Thinking
Reality, Economics, and Prices
What Is Contrary Thinking?
Daily Sentiment Index
Theory of DSI
Guidelines for Using DSI
Commitments of Traders Reports
Chapter 10: How to Trade Like a Pro
Attitudes and Behavior
Why Traders Fail
How to Identify Incompetence
How to Overcome Weaknesses
Tools for Successful Trading
Part Three: The Mechanics of Trading
Chapter 11: What You Should Know About Market Information Services and Brokers
Why Use a Service?
Types of Market Information Services Available to Futures Traders
Evaluating an Advisory Service
What Type of Trader Are You?
Finding a Broker
Chapter 12: What You Should Know About Order Placement
Traditional Order Entry and Execution
Online and Electronic Order Entry
Market-on-Close (MOC) Order
Market-If-Touched (MIT) Order
Fill or Kill Order
Good-Till-Canceled (GTC) Order/Open Order
Different Rules at Different Exchanges
Part Four: Advanced Trading Strategies and Techniques
Chapter 13: Advanced Concepts in Moving Averages
Moving Average Methods
Simple Moving Average
Weighted Moving Average
Exponential Moving Average
Triangular Moving Average
Best Performing Moving Averages
The Moving Average Channel (MAC)
The 3 High/3 Low Moving Average Channel for Short-Term Trading
Chapter 14: Aspects of Intraday Trading
Advantages of Intraday Trading
Prerequisites to Intraday Trading
Using Price Objectives and Stop Losses
Using Price Objectives
Using Trailing Stops
Systems for Intraday Trading
“The Old Standbys”
The Tick Chart Method
Books and Seminars
Websites and Chat Rooms
Chapter 15: Are Futures Options Right for You?
Many Ways to Go
Advantages of Futures Options
Liabilities and Limitations of Futures Options
Strategies for Using Options
Chapter 16: Artificial Intelligence and Neural Networks:
Myth or Messiah?
Characteristics of Neural Networks
Neural Networks and Trading
Putting It All Together
Chapter 17: Developing Your Own Trading Plan
Begin by Listing Your Limitations
List Your Goals
Choose Your Trading System
Plan Your Time and Make a Schedule
Evaluate Your Progress Regularly
Chapter 18: Managing Risk: A Major Key to Success
Keep a Trading Record
Study the Record Regularly and Frequently
Learn from Your Profits
Calculate How Much Capital You Should Risk
Use Stop-Loss Orders
Stand Aside When You're Confused
Don't Take Losses Personally
Know Your Competition
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