PRESENTS FUTURES TRADING BASICS

Transcription

1 PRESENTS FUTURES TRADING BASICS PRESENTED BY SCOTT COLE TACTICALTRADINGRESEARCH.COM Mission Statement Provide intelligent trading solutions to individual investors and financial professionals who actively manage their portfolios. All Rights Reserved Tactical Trading Research

2 DISCLAIMER Past performance is not necessarily indicative of future performance. The risk of loss in trading stocks, futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. Hypothetical trading results This trading course contains references to hypothetical trading results HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS ALL RIGHTS RESERVED. No part of this document may be reproduced or transmitted for resale or use by any party other than the individual purchaser who is the sole authorized user of this information. Purchaser is authorized to use any of the information in this publication for his or her own use only. All other reproduction or transmission, in any form or by any means, electronic or mechanical, including photocopying, recording or by any informational storage or retrieval system, is prohibited without express written permission from the publisher. LEGAL NOTICES: While all attempts have been made to provide effective, verifiable information in this document, neither the Author nor Publisher assumes any responsibility for errors, inaccuracies, or omissions. Any slights of people or organizations are unintentional. This publication is designed to provide accurate and authoritative information in regard to marketing and business development to the subject matter covered. All Rights Reserved. All written and published material is copyright protected by Scott Cole Enterprises LLC. All Rights Reserved Tactical Trading Research

3 FUTURES TRADING BASICS This report was presented just as an overview to provide a bit of a background regarding the futures markets. If you are new to futures trading, please take the time to read this section. The commodity futures markets were developed out of a need for businessmen and farmers to limit the risk of price changes by securing more certainty about prices and supplies. Until the futures markets were created, all activity involving commodities was handled in the cash markets. However, with technological advances and a growing population came more difficulties in brokering large quantities of goods all year round. Without the futures markets, it was difficult to deal with supply gluts that may occur immediately after harvest, or with shortages before harvest. Purchasers who may not have use of a commodity immediately also needed storage options and price protection. The commodity futures markets answered many of the needs of businessmen and farmers by offering the following characteristics Forward Pricing - Futures markets provide a way of determining prices in advance, even for periods over a year. This helps to limit price risk when a commodity is not sold or consumed immediately. The futures markets offer contracts for future delivery and their prices are established by the interaction of supply and demand from buyers and sellers. 2. Market Efficiency - Large numbers of traders gather in the pits at the futures exchanges or through computers, and this allows prices to be determined easily. The more easily prices are determined, the more efficient the markets can operate. As a result of this efficiency, the futures markets can offer increased liquidity, or the ability to move quickly in and out of a market within a tight range of prices. Without this increased liquidity, prices would not be determined as efficiently, and the end result would be higher prices. 3. Easy access - For every buyer in a futures market, there is a seller. Therefore, anyone who needs to transfer risk, such as a farmer, or anyone willing to accept risk (speculator), has an easily accessible place in which to conduct their business. 4. Storage capability is not required - markets for the future delivery are not limited to commodities that can be stored. If there are standards of quality that are easily defined, accessible price information, and broadly based production, a futures contract is suitable. As such, currencies, treasury securities, stock indexes, and commodities such as live hogs that must be slaughtered within certain weight parameters are examples of such markets where storage is not an issue. All Rights Reserved Tactical Trading Research

4 The standard futures contract is a legally enforceable agreement to make delivery or to take delivery of a specific quantity and grade of a particular commodity, or cash, during a designated delivery period. For example, February Gold futures contracts provide for delivery of 100 troy ounces of Gold during the February delivery period. It is not necessary to hold the contract until the delivery period (which could require making or taking delivery). Approximately 97% of all futures positions are actually liquidated when the trader offsets his/her initial position before the delivery period. In other words, if their initial position is long one December corn futures contract, they simply sell one December corn futures contract to offset the long position before the delivery period. Futures markets are traded on exchanges. These exchanges set the standard terms for each futures market traded on the exchange. By standardizing contract terms, futures markets make it easier to transfer risk caused by price fluctuations from those who do not wish to bear this risk (hedgers) to those that are willing to accept the risk (speculators). Each exchange has a clearinghouse whose function is to act as a third party to all futures transactions. If a buyer defaults on a payment, the clearinghouse becomes the buyer. By acting as a buyer for every seller, the clearinghouse guarantees the performance of all futures contracts. Qualifications for clearinghouses are established by the exchanges and there are strict standards to be met by the clearinghouses to qualify, due to the important financial role played by the clearinghouse. Hedging and Speculation Hedging can occur in two ways. The first type of hedge is a short hedge. A short hedge occurs when an individual such as a farmer, who has, or at some time in the future will have a commodity for sale, transfers the risk of price change by selling short in the futures markets. Selling short is the sale of a futures contract in the present with the promise to deliver the commodity, or repurchase the contract in the future. So, for example, if a corn contract is sold short at $5.00 per bushel, the seller will profit if prices decline before he is obligated to deliver the corn. If the price drops to $4 per bushel, the farmer profits on the futures contract if he opts to repurchase. When a hedger enters a short position, he essentially has two positions a long cash position in the physical commodity he is holding, and a short futures position. Because cash and futures prices tend to move in the same direction, if prices decline, the value of his cash position will decline, but the value of his short position increases by a similar amount. By All Rights Reserved Tactical Trading Research

5 entering the short position, the hedge essentially locked in a selling price for his product. However, the final price received also depends upon the change in the price difference between the cash market and the futures market, which is known as basis. Therefore, a hedge position may or may not give full protection against an adverse price move because of changes in the basis. The other type of hedge is a long hedge. When an individual or business needs to purchase a commodity for use or sale at some time in the future, they can hedge by buying futures to offset a potential rise in the price they pay in the cash market. Buying long is the present purchase of a futures contract with the promise to take delivery of the commodity or resell the contract in the future. When a hedge is long futures, he has two positions a short cash position since he has to buy the physical commodity and a long futures position. If the price rises, his gain in the futures market will at least partially offset the higher price he must pay in the cash market. By hedging, producers and users can set the prices they will receive or pay within a rough range. Reducing their exposure to price movements allows them to plan their operations. Hedging is made possible by the speculator, who assumes the risk of price range when he takes the opposite futures position from the hedger. The speculator does not have a cash position, and he usually intends to offset his position by re-selling a futures contract he purchased or re-purchasing a contract he sold short. He will realize a profit on a long position if the price rises and realize a profit on his short position if prices decline. The risk of loss is transferred from the hedger to the speculator because the sale of futures to a speculator enables losses in the short hedger s cash position to be offset by gains from his short futures position. A long hedger transfers price risk when the speculator sells short and the hedger buys futures. Any loss in the long hedger s cash position is offset by his gain in the futures markets. While the primary role of the speculator is to assume the risk transferred by hedgers, speculators also provide liquidity to the market. Without this increased liquidity, prices tend to be more volatile. One of the benefits to the speculator provided by the futures markets is leverage. In most futures markets, an investor can purchase a contract and control that contract with as little as 5% margin. For instance, if he buys a corn contract at $5.00 per bushel, the 5,000 bushel contract is worth $25,000. His margin may be as low as $1,250. If the price rises to $6.00 per bushel, the contract value rises to $30,000, meaning he has a $5,000 profit on an initial investment of just $1,250. All Rights Reserved Tactical Trading Research

6 However, just as there is an opportunity for substantial gain, there is the risk of substantial loss. The purchaser of a futures contract is responsible for the entire value of that contract. Therefore, if the speculator buys a corn futures contract at $5.00 per bushel, that contract is worth $25,000. If that price declines to $0, the speculator can conceivably lose more than his margin investment of $1,250, and up to $25,000. In other words, the speculator is responsible for the entire value of the contract, not just his margin investment. Margin Requirements Before you ever begin trading futures, it is important to understand the basics of margins, option premiums, price limits, and a host of other items. First of all, margin when it comes to futures trading is better described as earnest money, or a performance bond. A margin deposit assures the clearinghouse and brokerage firm of the trader's intention to buy, sell or fulfill a futures contract. Margin requirements are typically 5% to 10% of the contract value of a futures contract. However, the buyer or seller of the contract is liable for the full value. Futures brokers set the margin requirements for their customers while the clearinghouse sets the requirements for the brokerage firms. Clearing margin must be deposited by a brokerage firm with its clearinghouse to assure that firm's performance. When a customer initiates a trade, the margin deposited is called the "initial margin." Minimum initial margin levels are established by the exchanges, but brokerage firms may require higher margin deposits by their clients. Clearing members and their associated agents have discretion in permitting day traders to trade without margin, as long as the net position at the end of the day is margined. A customer may not withdraw funds that may cause their account to fall below the initial margin level. Initial margin is usually sufficient to cover the daily maximum price fluctuations in a given market. However, if that market becomes more volatile, the margin requirements may increase to reflect the added risk. The more risk, the higher the required margin deposit. Futures positions are settled daily. As such, margin account balances will fluctuate on a day to day basis. Losses are debited daily and gains are credited daily. For instance, if a trader is long one corn contract and corn prices rise 10 cents, then his account is marked to reflect the market price...in other words, his account will be credited with $500 (a one cent move in corn futures equates to $50). Conversely, if corn prices fall by 10 cents while the trader is long one contract, his account will be debited $500. All Rights Reserved Tactical Trading Research

7 A price movement in favor of a position results in the additional value of the market position added to the account, which increases the account balance. If this increase in the account value is enough to meet the margin requirements for another contract, then the trader may purchase an additional contract without depositing more money into the account. Adding additional contracts in decreasing quantities based upon accumulated profits in a trading position is called pyramiding. The exchanges and brokers also establish a maintenance margin level, below the initial margin level. Maintenance margin will vary with the commodity and exchange, but is commonly about 75% of the initial margin level. So, for instance, if the initial margin in corn futures is $1,000, the maintenance margin may be $750. Therefore, if a trader enters a long position in corn futures, and the price of corn declines by more than 5 cents, meaning the trade is down over $250, then his broker will request the trader to deposit more funds into the account. The trader can then do this, or close out his position. The broker also has the option of closing out the position at its discretion. It should be noted that the margin requirements for hedgers and exchange members is often less than for speculators. That covers the basics for the topic of margin. It should be noted that professional traders and commodity trading advisors are generally not overly concerned with margin requirements because they tend to be more concerned with preserving capital. Quite often, they will keep their margin to equity ratio at 20% or less. Small speculators and beginning traders often make the mistake of opening an account with limited trading capital. They are drawn to the potential for making a lot of money in a short period of time due to the significant amount of leverage involved in futures trading. However, this is also why the vast majority of new traders end up closing their accounts in six months or less. Customer Accounts The most common type of account opened by futures trader is the non-discretionary margin account. In this case, the individual opening the account will direct all trading activity in the account. In order to open an account, the customer must receive, review and sign a number of documents. These are discussed as follows: The first agreement is the Commodity Customer Agreement. This is the request from the client to open the account. This agreement includes definitions of various terms used in the agreement, a statement that all transactions must occur in accordance with the rules of the exchanges and Commodity Futures Trading Commission (CFTC), a statement regarding communications and addresses to be used, a statement regarding procedures to be followed All Rights Reserved Tactical Trading Research

8 in the event that property is not deliverable as agreed, as well as any other statements by which the parties must abide. Basically, this agreement discusses some of the terms by which the customer and brokerage firm will conduct their behavior. The next agreement is the Customer s Margin Agreement. This is actually a part of the Commodity Customer Agreement, and it discusses the way that margin will be handled by the Futures Clearing Merchant (FCM) and the customer. The agreement contains a number of applicable definitions, a promise from the customer to meet margin calls, permission for the FCM to use any and all of the customer s property to meet margin calls or insure payment of funds lent to meet the customer s margin requirements, and the right of the FCM to close any positions when it believes a position is under margined. The Transfer of Funds Agreement allows the FCM to transfer funds from a customer s securities account to his futures account to meet a margin deficiency. Probably the most important document involved in opening an account is the Risk Disclosure Document. This document discusses the risks involved in futures trading, and is a document required by the CFTC. The primary disclosure in this document is that there is a risk that you may lose your entire investment, and under certain circumstances, may find it impossible to liquidate a position. Furthermore, spread positions may not be less risky than simple long and short positions and the use of leverage can lead to larger losses as well as large profits. The risk disclosure document must include a verbatim risk disclosure statement. There is also a separate risk disclosure document for options that warns of the risk of loss in options trading. Types of Orders There are three basic types of orders market orders, stop orders, and limit orders. There are also variations on these order types, but for our purposes, we will simply focus on these three basic order types. Market Order The most common order type is the market order. Market orders are simply orders to buy or sell at the best possible price as soon as possible. These orders are best used in liquid markets. They are the first orders to be filled at any given price, and are used to enter or exit the market quickly, no matter the price. Stop Orders All Rights Reserved Tactical Trading Research

9 Stop orders are executed only when the market price trades at or through the stop price. For instance, if the current price is 100, you might have a stop order to buy at 101, and a stop order to sell at 99. Buy stops are always placed above the current market price and sell stops are always placed below the market price. Limit Orders Limit orders are generally used to buy or sell at a specified price, or better price. A buy limit order is placed below the current market price, and a sell limit order is placed above the the market price. A buy limit will only be filed at or below the limit price, and a sell limit order will only be filled at or above the limit price. Limit orders are most commonly used by large trading entities when they have a sizable order to execute. Commodity trading advisors and hedge funds employ execution traders whose sole purpose is to execute trades at the best prices possible once trading signals are triggered. Fundamental vs. Technical Analysis Fundamental analysis is essentially the analysis of factors that affect supply and demand. When looking on a simple graph, where supply intersects demand, you have price. If supply is tight and demand is strong, price will be high. If supply is ample and demand is weak, price will be low. Unfortunately, developing accurate conclusions regarding either supply or demand can be very difficult. Furthermore, even if supply and demand can be accurately determined, the market price may not reflect the conclusion, because market psychology may have a different opinion. To improve the timing of their trades, many traders employ technical analysis. Technical analysis is most simply described as the analysis of the price and volume of a security. The users of technical analysis believe that past historical price and volume patterns can help them forecast future prices, or at least the future direction of prices. Again, however, their timing is usually not perfect, and if they use too much leverage, they will go bust quickly. These traders will employ a host of technical analysis tools such as price oscillators, volume indicators, Elliott Wave Analysis, Fibonacci levels, etc. Most of the money managers in the world of futures trading tend to employ methods mostly aligned with technical analysis. Many of these traders employ number crunchers who build computer programs to test historical data in the hope of finding a price pattern that works All Rights Reserved Tactical Trading Research

10 repeatedly. Still, however, these managers will also employ stringent risk control measures in order to preserve capital during periods where their trading systems may not be working as well. The bottom line is that the individual trader needs to find a methodology that suits their own personality. What works for one trader may not work for another. For instance, a trader who likes to capitalize on major trends must be extremely disciplined and patient in their trading, and willing to accept long losing streaks, and sizable drawdowns in their account. In the long run, they know that they will make significant money. Another trader may be too impatient to follow such a strategy, and might prefer day trading instead. For the individual who does not have the time to trade on their own, it is a good idea to select a professional who will trade their account in a way that suits their own personality. There are many brokers and commodity trading advisors, and many trading styles to choose from. Some professionals will also be familiar with a variety of strategies and be able to employ these based upon individual preferences. More Things You Need To Know More on Margins and Leverage Each futures market has different margin requirements. These requirements are based upon the volatility in the market and the contract specifications. Some markets such as the big S&P 500 contract have significantly higher margin requirements than others such as the agricultural contracts. For instance, the margin required to trade the big S&P 500 contract is currently (as of June 2014) over $23,000. On the other hand, you can trade a micro sized currency futures contract such as the micro Japanese Yen with as little as a few hundred dollars. With this in mind, it is necessary for traders with small accounts to pay attention to margin requirements so they know what markets they will be able to trade. A trader with just a $10,000 account will not meet the $23,000 margin requirement to trade the big S&P 500 contract. Because of the relatively small amount of margin required to trade futures contracts in relation to the underlying contract size, trading futures involves significant leverage. This is one of the main attractions to futures trading and forex trading by smaller investors. They All Rights Reserved Tactical Trading Research

11 believe they can make a fortune in a small period of time. This is true, but it requires luck, and the fact is, most futures and forex traders lose money over the long run. Professional money managers who trade futures, known as Commodity Trading Advisors (CTAs), actually employ as little leverage as possible. They determine the amount of leverage they use by understanding the type of returns required by their investors, along with the amount of volatility their investors are able to stomach in order to achieve those returns. Generally speaking, most sophisticated investors understand that they should expect a maximum drawdown of 1.5 to 2.5 times the compound annual return they are targeting. For instance, if they are targeting a 10% rate of return over the long run, they should expect a maximum drawdown ranging from 15% to 25% at some point. In the case of trend followers, maximum drawdowns tend to exceed 2 times the compound annual return. Shorter term quantitative type traders will usually target a much lower drawdown. Liquidity Liquidity is also an important concern for futures traders. While it may seem cool to trade such markets as orange juice, lumber or some exotic currency, there are days when only a couple hundred contracts are traded in some of these markets, or even less. Lack of liquidity often leads to significant execution slippage, which will then impact your bottom line. Execution slippage is simply the difference between the price in which your order is filled, and the price you intended to execute the trade. For instance, if you are buying crude oil, and you wanted to buy at $100, but you are filled at $100.05, your slippage is 5 cents, which equates to $50. That may not seem like much, but it accumulates over time. With this in mind, it is best for new traders to stick with the more liquid markets such as the e-mini S&P 500, the main currency futures, interest rate futures such as the 30 Year Bond, and some commodities such as gold, crude oil and soybeans. As you become more experienced, feel free to trade some of the other markets. Rollovers If you employ a trend following approach (we ll be covering three main approaches to trading in another module, trend following being one of them), it is likely that you will have to roll over your position from one contract month to another contract month. However, not all markets are the same. For instance, in the energy sector, there is a contract for each calendar month of the year. As one month expires, the very next month becomes the most liquid contract. As a long term trend follower, rolling over your position each month will generate more commissions and even slippage when rolling over your position. On the other hand, All Rights Reserved Tactical Trading Research

12 most financial related markets and the currency futures only trade in quarterly contracts usually March, June, September and December. Some agricultural commodities have contracts set up based upon the growing seasons and harvests. With this in mind, it is necessary to pay close attention to the nuances in each individual market you intend to trade. Also, you must identify the best times to roll your positions. It is usually a good idea to roll over your position before the First Notice Day, which is the day in which traders with positions will be notified whether they will need to indicate if they will take delivery, or make delivery of a futures contract. You definitely do not want to get caught with a position on the last trading day since volatility can spike, and liquidity can dry up. A good rule of thumb for rolling your position is to identify when the volume in the front month first falls below the volume in a future month. For instance, if you are long the March Yen, sometime in March, the June contract will start to have more volume. If you intend to stay long, you should roll your position when that occurs. Occasionally, when you are approaching the last trading day for a market, you should analyze the next liquid contract month to see if it exhibits the same characteristics as the current contract. For instance, in the case of a supply squeeze, the price of the front month in soybeans may spike higher as you approach the last trading day. However, if the next significant contract month does not exhibit this behavior, it may be a good idea to simply exit your position, rather than roll it into the next contract month. With all this in mind, it is a good idea to study the contract specifications and overall characteristics of each market you intend to trade, otherwise a mistake can cost you dearly. How Most Commodity Trading Advisors (CTAs) Generate Profits To learn how CTAs trade in the futures markets, visit Autumngold.com. This site is a service to investors who desire to invest in managed futures. The site provides a listing of several hundred CTAs along with a discussion of their assets under management, performance history and a general description of their trading methodology. Most CTAs employ a systematic approach to trading, and in general, the CTAs who have been in business over the longest period of time typically employ a systematic TREND FOLLOWING approach to trading. All Rights Reserved Tactical Trading Research

13 In other words, most are NOT day traders, discretionary traders or short term swing traders. Some employ other methodologies such as short term, pattern recognition, options trading, spread trading, or some other methodology. Few employ fundamental analysis. I am of the opinion that it is critical to your success to learn what successful traders do or have done. I personally have been exposed to a variety of strategies employed by successful CTAs, and few employ the standard methods taught to individual traders through most trading courses and services. With that said, you still need to learn those methods so you can understand what not to do, and to avoid the crowd. Most successful traders also do what is difficult for most people to do. Trend following in particular is one strategy that is very difficult to employ for most people since the vast majority of trades end up as losing trades. Finally, by understanding how most CTAs approach trading, and how most individuals approach trading, you will be able to develop an edge for yourself, that will allow you to become profitable over the long run. Don t Quit Your Job The biggest mistake you can make is to quit your job thinking you will be able to support yourself from your trading. Few people are able to do this successfully. That s just reality. The superstar traders you may have read about do not make a living by trading their own money. They make big money through the management and incentive fees they receive by managing money for individual and institutional investors. Consider this if you have a job that pays your $60,000 per year and pays your bills, you will need to generate that kind of income from your trading. The most successful long running CTAs generate compound annual rates of return of around 15-20% for their customers. $60,000 is 20% of $300,000. Do you have $300,000 in risk capital? Most people start out with far less money, thinking they will be profitable every month through day trading or short term trading. If you started out with $100,000 you would need to make a 60% return to generate $60,000. That s awfully good and virtually no professional trader achieves that goal from year to year. All Rights Reserved Tactical Trading Research

14 Unfortunately, many of the unscrupulous vendors out there selling you systems and courses will imply that you can make 1,000% or more due to the leverage inherent in the futures and forex markets. Sure, you can make a lot of money quickly, but that leverage is a double edged sword. You can lose more than your investment if you don t employ strict risk management. Goals Your goals will be dependent upon the approach to trading you choose. If you choose trend following, your goal should be to generate strong absolute returns over the long run while employing the power of compounding. You can t expect to be profitable every month or even every year when employing this approach the markets simply won t cooperate. If you decide on a shorter term approach, your goal should simply to be profitable every month. Your skill will determine whether this will be the case, and it will likely take you years of trading experience before you can attain that goal. Again, the markets are not there to cooperate with your goals. Tools of the Trade If you intend to trade futures, you should be aware that it is a business like any other in that there are expenses involved. First, you obviously need a computer to take advantage of the online trading platforms available today. Today s technology allows you the ability to execute trades with far more efficiency. Broker When you are ready to start trading, you will need to select a broker. There are too many here to discuss, but I recommend utilizing a broker that offers an easy to use trading platform. Most brokers provide this ability. Data It is imperative that you study the past to generate ideas on how to trade in the future. You should select a data vendor that provides you with a substantial amount of historical, end of day data at the very least. My two favorites are Norgate Investor Services ( and Pinnacle Data ( You can expect an investment of about $250 to $400 for these services. All Rights Reserved Tactical Trading Research

15 CSI ( provides more data, but is far more expensive. Some of the trading platforms such as TradeStation will also provide you with historical data, but you will pay a fee for that data far above what you will pay for the data from the two services I mentioned. Charting To view your end of day data, you will need a charting package. I have used Metastock for over 20 years ( You will want a package that provides you with all of the common technical indicators. Metastock and Tradestation fit that bill. Final Thoughts Ultimately, you will want to approach trading futures as you would any business. You need to understand the expenses involved, set goals, and approach the business with discipline. You will need to set aside time each day to conduct your analysis and prepare for the trading day ahead. All Rights Reserved Tactical Trading Research

16 Recommended Reading I highly recommend you obtain the following books Market Wizards and The New Market Wizards by Jack Schwager. Futures Fundamental Analysis by Jack Schwager. Trading For a Living by Alexander Elder Reminiscences of a Stock Operator by Edwin Lefevre Some of these have been mentioned before, so you understand that it is important to supplement what you are learning here with the reading lists we provide. Stay patient as we try to increase your trading IQ. There is a lot of good information coming to you. To be prepared for the next module, be sure to get your data and charting set up. To your success! Scott Cole Tactical Trading Research All Rights Reserved Tactical Trading Research