Does Moving From Stock Trading To Futures Trading Make Sense For You?

Futures trading has grown in popularity tremendously over the last 10 years. It is done so with good reason. Traders are in and investors are seeking higher rates of return than they normally obtained using stocks as a trading vehicle. Since the decline of the emotional exuberance and sky high stock prices and volatility in the early 2000's traders and investors have been trying to find a way to obtain greater returns.

As with any method of trading or investment futures has its advantages and disadvantages. Whether a particular facet of futures trading is an advantage or disadvantage depends on whether it is working for you or against you at the time. For instance, futures are inherently volatile. This volatility can make for tremendous price moves in which incredible profits can be gained. Conversely, if you happen to be on the wrong side of a volatile futures trading move in large losses can be the result.

One notable difference between futures in stock, is that it is highly unlikely that if any one company goes bankrupt and belly-up that any of the futures markets would go to zero. In the stock market, if a particular company that you've invested in those bankrupt or belly-up, here is a high likelihood that you are going to lose money, and in a case like this, a lot of it.

Both stock trading and futures trading have risks associated with them. Futures trading is viewed as more risky, because of the great amount of leverage involved when using futures contracts. This tremendous amount of leverage is one of the biggest reasons that traders become involved in trading futures. It is this leverage which allows some futures traders the opportunity to amass impressive gains even when starting with a modest amount of capital.

If you have not traded futures before and you have an interest in getting involved please make sure that you do your homework first. And remember that the fantastic amount of leverage is a double-edged sword that can work against you as easily as it could work for you.