Online Futures Trading - Getting Your Start With Paper Trading
In sports the saying is that you only play as good as you practice. In other words, if you don’t work hard learning to do something well you will never do it well when the game begins. The same is true when it comes to investing; if you don’t learn the concepts of successful trading before you start investing, you are in danger of losing a lot of money very fast. Thanks to the wonderful world of computers, you can prepare for online futures trading by paper trading.
What is Paper Trading?
At this moment you probably understand online futures trading, but paper trading may be strange to you. Paper trading is a method of online futures trading where you can practice investing in the stock market with a hypothetical brokerage account. Everything about this type of online futures trading is the same as the real thing but with paper trading, you lose nothing. If you make a bad purchase when you are paper trading, it is recorded in your “account” but since you didn’t actually do any online futures trading, you didn’t lose any real money.
What is Online Futures Trading?
Online futures trading is different from trading common stocks or bonds since you don’t actually take possession of anything. In online futures trading, you are speculating on the future direction of a commodity’s price that you are trading on the Internet. It is kind of like placing a bet on which way a price will move. “Buy" and "sell" are terms that indicate the direction you expect future prices will take. You only need to deposit enough money with a brokerage firm to insure that you will be able to pay the losses if your trades lose money; take a good look at the words “pay the losses”. When paper trading futures, you are immune from those dirty words!
Online futures trading offers a form of price protection for those who are trading and investing. A farmer may sell corn futures on his crop if he thinks the price will go down before the harvest; conversely, a cereal manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The other person in the deal is the investor who never sees the trading floor, but is doing online futures trading and looking to gain advantages by buying or selling futures at a profit.
Getting Started with Online Futures Trading
There are quite a few companies on the Internet that offer free paper trading; a simple Google search will give you more choices that you can imagine. These companies offer this service in hopes that after you get comfortable with online futures trading, you will open a commodity account with them. In the meantime, once you have registered, simply follow the directions of the commodity trading software and you are ready to begin.
What You Might Notice
If you decide to get started without learning anything about online futures trading, you will be in for a surprise. The language of futures trading is different. There is terminology you need to learn, strategies that you won’t understand and even the trading software will probably be confusing. It's kind of like assembling a child’s bike; before you start, read the directions. Before you try to start commodities trading, learn the terms, learning the techniques and learn the software where you are doing online futures trading.
Is Paper Trading Futures Important?
By itself, paper trading futures is not important; it just simulates the things required for online futures trading. What is important while paper trading futures is the approach you take. If you take this lightly or don’t understand the importance of learning futures trading, you should seriously reconsider ever entering the futures markets. This is a skill to learn and not doing so means losing your money, so don’t take your paper trading or your online futures trading lightly.
Conclusion
Online futures trading is a unique business opportunity where you can practice and learn for free. A successful trader will use the opportunity to practice investing before trying online futures investing.
Market Direction: How often have you heard a so-called "professional" tell us this market is overbought? That evaluation has been promoted ever since September of last year. Those forward-looking statements are the exact reason why you should let the market tell you what the market is doing. Some of the most respected analysts have been anticipating a huge pullback for the past year. Will there be a market correction? Could be, but if you base your investment program on "could be's", you would have lost the potential of big profits over the past year. The problem with listening to somebody telling us market is overbought is that their opinion is contrary to the millions of investment decisions that have put the market where it is. The markets trade at levels that are based upon the accumulation of all investment decisions.
What is the market telling us? Obviously, every time the markets pullback, the Bulls step right back in again. Even with all the reasons that have been given for the market to head lower, the overall trend has remained upwards. That may seem like a very elementary analysis, but what is the market telling us? All indications very simply show that the bullish sentiment is still the major factor of this market. Nothing more needs to be analyzed as far as market direction. If the uptrend is still the predominant trend, current investing programs should be oriented in that direction. The benefit of candlestick signals is that it not only reveals when a reversal of a trend has occurred, but it also reveals what a reversal of a trend has not occurred. The investor sentiment built into candlestick signals allows an investor to evaluate whether investor sentiment has changed or has not changed.
The signals become more informative when applied in conjunction with other indicators. The tee line is a very effective analytical trend tool. As illustrated in the Dow chart, the tee line has been an obvious factor in the current uptrend. The pullback on Thursday was not a true candlestick signal, it opened slightly below the previous day's close, it did not form a Bearish Engulfing signal. Although the trading of Thursday was very close to being considered a Bearish Engulfing signal, technically it was not. This slight differential is meaningful. Had this price pattern produced significant results, the Japanese Rice traders would have made a point of identifying these patterns. The fact that they didn't makes a reversal from a non-signal reversal less credible.
DOW
The lack of selling strength makes watching for the pullback to support at likely support levels. When the Dow and the NASDAQ pulled back to important moving averages pertaining to their up trends, on a non-reversal signal, the candlestick investor has the advantage of anticipating a less powerful attempt of a sell off. This is nothing more than assuming that candlestick reversal signals have more potency versus a non-reversal selling pattern. Candlestick analysis makes anticipating trend movement much easier when knowing what the signals should tell us or not tell us.
NAS
The point of learning candlestick analysis is understanding the investor psychology that creates major reversals in a price trend. Whereas the lack of a reversal signal indicates that the trend is probably still in progress, witnessing situations that illustrate a strong reversal pattern makes for a high probability trade. The probabilities become even greater when able to analyze the general trend of the market. Currently, the markets appear to be in an uptrend or at least a sideways market. Nothing indicates that the sellers are in control of the trend. Having that knowledge allows the candlestick investor to take advantage of strong reversal signals that may benefit from an uptrend in market.
A good example is DVAX. Friday's trading had a gap down open. It finished the day forming a Doji in an oversold condition. A gap down Doji usually indicates the exhaustion selling before the Bulls start taking a position. A Doji and oversold condition followed by a bullish engulfing signal clearly reveals the investor sentiment is changing. This now becomes a strong bullish candidate. Where is the best place to buy? When a candlestick buy signal occurs and oversold condition.
DVAX
Candlestick signals have powerful implications. They are the results of centuries of profitable observations. The members' chatroom provides a daily flow of candlestick investment information. One of the major benefits of being a Candlestick Forum member is the access to successful traders that freely share the knowledge that will help you become not only a successful trade yourself, but understand why prices move the way they do.
Chat session - The Monday night chat session is canceled due to a schedule conflict.
June 9, 2007 Cleveland, OH (Paid Event)
Rick Saddler with Hit & Run Candlesticks will be at the Hilton Garden Inn (Cleveland Airport) in Cleveland, Ohio for the 'Trading for Profit' seminar. For more information on his course offerings contact rick@candlestickforum.com or Click Here 30% Discount to first 10 Seminar Registrants.