In the capital markets, the term “risk” means different things to different people. At the exchange level, risk is a function of systemic liquidity. For institutional investors, it’s a degree of market exposure. For retail traders, risk is the amount of money in harm’s way at any given time. However, no matter your role in… Read more.
In the real world, the term safe haven refers to a physical place where a person can escape from danger. In finance, a safe haven is an asset that holds or increases its value amid uncertainty. Whether a ship’s captain seeks a harbor to ride out a storm or an investor shifts liquidities to safe… Read more.
Among the many advantages of futures trading is its utility in regard to risk management. Futures give market participants the ability to directly increase or decrease exposure to almost any asset class. This is possible because of three primary futures market characteristics: standardization, liquidity, and volatility. Given these benefits, traders may proactively limit risk by… Read more.
In the real world, as well as in the markets, managing risk is a critical part of avoiding financial catastrophe. From buying a life insurance policy to diversifying your portfolio, actively addressing risk can save countless dollars and provide peace of mind.
No matter what your goals and resources are, having a structured approach to market entry, exit, and risk management is a necessity. Without this type of plan, the vast majority of futures trading strategies will fall short of their potential. In reality, active traders have thousands of strategies at their disposal. The best ones are… Read more.
Cross commodity hedging is a popular way of managing risk for producers and speculators alike. Also referred to as cross hedging, this financial strategy involves opening positions in related markets to mitigate systemic exposure. While sophistication levels vary wildly and depend upon a variety of inputs, this methodology is a viable way of protecting wealth… Read more.
Futures trading is often characterized as being similar to playing poker or betting horses for a living. The possibility of financial loss brings with it negative connotations ― the high wash-out rate for market newbies only fuels the fire. When it comes right down to it, many people view futures as nothing more than a… Read more.
Don’t trade with a blindfold, trade with a plan! Managing risk equals having a plan, and there are 3 important points to keep in mind before entering a trade. Develop a plan, Stick to your plan, and Adjust your plan if the trade is profitable.
Margin Requirements Are Not Recommendations Many consider the leverage involved with futures to be a blessing and a curse. There are few investing environments that will give an individual investor as much leverage as they can receive from an FCM and exchange — those responsible for setting margins. For example, one clearing firm we work… Read more.
This article orginially appeared on June 04, 2010 in FutureSource’s Fast Break Newsletter, where Brian is a regular contributor. How difficult do you find it to enter into the market? If you think about it, “getting in” is not that difficult. The common problem that many traders face is not getting into a trade… the… Read more.