Futures Commodity Trading Ticket Types
One of the interesting features of futures options trading is the versatility. With futures commodity trading, you are not just buying or selling; every decision brings other possibilities and more interesting variables. Below are some of the typical ticket types in futures commodity trading.
The Market Order
The market order is the most common order for the beginner investing in futures commodity trading. Once you have decided to open or close a position, you can use a market order. This futures commodity trading order is executed at the best possible price obtainable at the time the order reaches the trading pit.
The Limit Order
A limit order is a directive to buy or sell at a specific price. In commodity trading, limit orders to buy are placed below the market while limit orders to sell are placed above the market. Since it is possible that the market may never reach a limit order, an investor could miss out on the position if he or she uses a limit order. In most instances with this futures commodity trading order, the market must trade through the limit price for the customer to get a fill.
Market If Touched (MIT)
MIT orders serve the opposite purpose of stop orders. Buy MIT orders are placed below the market and Sell MIT orders are placed above the market. An MIT order is usually used to enter the market or initiate a trade. An MIT order is similar to a limit order in that a specific price is placed on the order; an MIT order becomes a market order once the limit price is touched or passed through. In futures commodity trading, a MIT order would be considered on of the basic commodities trading orders.
Stop Orders
Stop orders can be used for three different strategies.
- To protect against big losses on long or short positions (as stop loss orders)
- To protect a profit on an existing position
- To start a new long or short position
Fill or Kill
The fill or kill order is used by successful traders wanting an immediate fill, but at a specific price. The broker on the floor will bid the order three times and if it is not filled, it is killed, or cancelled.
Spread
A spread is used when trading commodities by an investor who wishes to take long and short positions at the same time in an attempt to profit via the price difference, or "spread" between two prices. A spread can be established between different months of the same commodity, between related commodities or between the same or related commodities traded on two different exchanges. For example: Buy 1 June Corn, Sell 1 September Corn plus 5 to the September sell side. This means that the customer wants to initiate or liquidate the spread when September corn prices are 5 points higher than June corn prices.
Bull Call Spread
A bull call spread is an advanced commodity option trading strategy that can be used in times of high volatility. The spread is the purchase of at or near the money call and the sale of an out of the money call. The maximum profit potential is the difference between the strike prices minus trading costs. The maximum loss potential is the total cost of the spread.
Bear Put Spread
A bear put spread is a futures commodity trading technique that is used just like a bull call spread but is used in anticipation of lower prices and therefore uses puts instead of calls. This type of futures commodity trading can be considered as defensive investing since it is done during high volatility periods.
Straddle
A straddle is a futures commodity trading strategy that is used to take advantage of a large price move up or down. This strategy, a buy straddle, involves buying a put and a call at the same strike price and preferably at the money. The investor is hoping for either the call's or the put's premium to increase enough to offset the costs and make a profit.
Strangle
A strangle is a futures commodity trading strategy that is used to take advantage of a large price move up or down just like the straddle but it uses out of the money strike prices. An example of a buy strangle would be buying a $3.10 December corn call and buying a $2.90 December corn put when the December corn futures price is $3. This futures commodity trading strategy seeks to profit from the different strike prices.
Conclusion
Futures commodity trading is very interesting because there are so many possible positions to take. By learning these positions, an investor can make money futures commodity trading whether implementing a calendar spread or buying puts.
Market Direction: When the market remains in a consistent trend, the availability of pattern setups becomes much greater. When investor sentiment is not being altered by massive swings in the general market conditions, more time can be put into the evaluation of individual stock prices. This additional time allows for price patterns to develop. If a price pattern develops and then performs as expected in a specific industry/sector, it is logical to assume that other similar price patterns in that sector should have a high probability of performing as expected also.
As illustrated in the WNR chart, the Fry Pan Bottom pattern allows for the expectation of a big price move at the end of that pattern. When the technical analysis illustrates a strong price move, the fundamental reasons for the price move will usually be publicized in the media. Oil refiners should show strong profits at it has become evident that the bottleneck for gasoline supplies is that the refining stage. It has become well known that no new refineries have been built in the United States for approximate 30 years. This should make for the opportunity for refiners to improve their profit margins. With that scenario built into the price move of refining companies such as WNR, it should be also easy to figure out that other charts in the refining sector that look the same have the same upside potential.
WNR
Alon USA Energy Inc. is also coming out of a fry pan bottom and just breaking out to the upside. Common sense should dictate that the same investment rationale that contributed to the WNR price move could also be applied to the confirmation of the Fry Pan Bottom pattern in the ALJ chart. The same rules that are applied to a candlestick Fry Pan Bottom pattern can be applied when establishing a position in ALJ.
ALJ
The upside potential, based upon this pattern, now has better credibility because of other charts showing the same price movement in the same sector. This is nothing more than analyzing investor sentiment based upon price movements that have been observed to work successfully for hundreds of years as well as the past few weeks. Take advantage of what the candlestick signals and patterns can provide.
The markets are working in a very slow and methodical uptrend. The fact that the selling occurs in the morning followed by the buying in the afternoon is a very healthy sign. Profit taking is occurring during the uptrend. This makes for a much more solid move. Currently there is nothing to indicate any great change of the current market trend.
Good investing,
Stephen Bigalow and the Candlestick Forum Team
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