I never traded futures or options and want to start trading online from the start?
This is one of the biggest mistakes that beginning traders make. Unfortunately, trading futures and options is VERY different than trading online through an online stock brokerage company. Beginning traders need guidance about expiration dates, volatility, reports, liquidity and several other small factors that can make a big difference in the bottom line. We highly advise starting out with a broker or spread betting, at least for the first few months of trading.
Should I trade futures or options when starting out?
This is another question we get asked all the time. Whether you should trade options or futures contracts in the beginning largely depends on your account size. A small account is anything in the neighborhood of $5,000 dollars. The average loss for a very conservative futures contract such as bean oil or corn will be in the $500-$1,000 dollar range. This is realistic when you take into account slippage and commission costs.
Also, there are just limited contracts that are in this small leverage range. Therefore, common sense should tell you that a small account will only be able to afford a few losers before being wiped out. This is not a practical way to trade a small account because a few loosing trades may wipe out the entire account. This can be emotionally devastating, especially for a beginning trader. Contrary to what you may have heard, most professional traders are right on only 35% of the time on their trades. The key to profits is not how often you are right but how much you make when you are right. This is the difference between expectancy and probability. This is the primary difference between beginning traders and professional traders. Beginning traders always feel that they have to be right, professional traders ride the winners and take very small losses.