trading tutorial helps trading in the commodity market and stock market

Reading Stock and Futures Charts - continued

Getting Ready For Futures Trading

Overview

Futures trading is highly leveraged making it possible to earn much higher profits in a shorter time frame than stocks. But this same feature makes it even more imperitive that protective stops be used whenever a trade is started. Agricultural futures (also knwn as commodities) have an additional risk: every so often the price can jump up or down so fast as to make protective stops ineffective. That can take a loss from a few hundred dollars per contract to a few thousand dollar per contract by the time exit is possilbe over night or early the next trading session. But this is a rare event.

Contract Months

The letters represent the months that these contracts end. For example, "H" represents a contract ending in March and 'Z' is for a contract ending in December.

Tick Size

This is the value of the smallest amount that price can move per day. In this example a price move of 0.25 is worth $12.50, or a move of 1 is worth $50.

Trading Hours

Most markets are electonic today. In this example (when the end of the period is earlier than the beginning) the session starts at 5PM on Sunday and ends at 2PM on Friday.

Initial and Maintenance Margin

"Initial" margin is the amount of money you must have in your account to trade each contract ($2,700 in this example). After entering the trade the maintenance margin is always less (in this case it drops to $2,400). Without this a significant enough loss from your entry would result in a margin call. A "margin call" is when a big enough loss results in the brokerage demanding more money to stay in the trade. The appropriate use of protective stops makes this scenario unlikely.

First Notice Day and Last Trading Day

This is a warning to exit the trade and the last day that the particular contract is tradeable.

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