What are managed futures,
and why you should consider using them
Trading futures offers huge returns but it is
also a very high-risk investment.
If an investor finds himself on the wrong side of the market, he could find himself
realizing large losses as quickly as large gains. Therefore, it is essential that an
investor knows what he is doing; has access to up-to-the-minute data; has invested in top
trading software; and has the confidence and experience to trade effectively.
It is common knowledge that a majority of individual
investors who attempt to trade the commodity and futures markets lose money.
This could be explained by the fact that an individual is competing against hundreds of
thousands of other investors (private and professional) who may often trade with vastly
superior software, and have better trading knowledge and experience.
So what is the solution? How does a private investor benefit from the high leverage of
futures trading, without exposing himself to the inherent risks?
Perhaps the answer lies with Professionally Managed Futures Accounts.
How does a Managed Trading Account Work?
Under a managed trading account, a professional team of
traders and brokers place positions on the futures, options and commodity
markets with a client's funds. All profits and losses are kept by the
individual's account, and he pays a fixed commission fee per trade executed
on his account by the broker.
A futures brokerage firm will often have years
or decades of experience at their disposal, utilizing numerous staff members who will
follow market charts, read dozens of market reports, listen to real time trading news, and
perhaps have futures traders in the thick-of-the-action, working in the pits.
Alternatively, you can have your money traded by computers programmed with
sophisticated mathematical systems.
A managed futures broker will be able to place
your trades for you while you are at work, or on holiday.
Using a managed futures and options trading
account, you can benefit from:
Minimal time spent following the markets
yourself - if any at all;
A team of professional traders and brokers
with years or decades of experience;
Stress-free entry/exits of market positions;
Help and advice on the markets to trade;
Advice on money management;
Access to the world's top computerised trading
The ability to diversify your portfolio,
even if you are already an active futures trader, or have other investments in the futures
and options markets;
US residents can use their Independent
Retirement Account (IRA) with the opportunity to receive higher returns than an investment
The broker will have invested substantial
capital and time in trading software and market research... probably far more than most
individuals could afford.
Who should use managed futures?
I feel that most investors should think about
diversifying their portfolio into the futures markets.
Even active futures traders could benefit from
putting a proportion of their capital in a managed futures account in case their own
trading system under-performs.
What markets are covered by managed
As well as stock market indices, such as the
Dow Jones, S&P and Nasdaq, managed futures usually encompass commodity and currency
markets. This diversification over a wide range of markets, as well as the fact that
futures are regularly short-sold as well as bought, should enable profits to be made
overall by a sound trading system in bullish or bearish markets.
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