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Why Trading Futures Is Better Than Stocks

futures better than stocks

Did you know that trading futures contracts can be more beneficial to your financial goals than trading traditional stocks? In today’s fast-paced and changing world, this is an important factor that many people overlook. If you’ve been thinking about opening a position in the stock market but have been reluctant to take action because of fear or uncertainty, here are five solid reasons why trading futures contracts could be the right choice for you:

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1. More Flexibility and Power:

Futures contracts can help you get a stronger foothold in your personal or business goals by giving you more flexibility, power, and coverage. The average futures contract has an expiration date of 31 days, unlike stocks which can be up to four times that (120 days). This allows you to hold your position for longer periods, giving you more time to make money or recoup losses.

2. Less Risk:

Futures contracts are one of a few ways investors can profit during market upswings without having to invest beyond their means. Bonds, cash savings accounts, and many other investments help grow your assets safe from loss-making danger; however, they do not allow you to take advantage of the upward growth potential present within the markets. Unlike stocks, futures contracts have very little downside risk as they maintain a fixed cost per trade regardless of what happens within the industry over short periods. In addition, most traders only risk a very small percentage of their overall portfolio per trade.

3. Steady and Consistent:

Futures contracts help you get the most out of your potential earnings by giving you steady income over periods in line with your targets. For example, consistency is one of the most important factors in growing investment portfolios because this allows for a more manageable approach to risk management and trading opportunities. In contrast, many people who trade stocks often find themselves hitting walls or losing big chunks of their investments when they try to hold onto them for too long. This is not true with futures contracts, which can help give you a better opportunity for growth while mitigating the need to deal with major market fluctuations that occur day-to-day during short holding periods.

4. More Predictability:

For many people, one of the biggest reasons to invest in stocks is to enjoy again from market fluctuations and unpredictable trends. The problem with this logic is that such benefits are not always guaranteed and can be very difficult to come by depending on the time frame you’re investing in. However, with futures contracts, your ability to enjoy these benefits becomes much more predictable due to their high degree of liquidity and steady nature over short periods.

5. Lower Entry Bar:

Perhaps one of the greatest advantages for new investors who want to get involved in the stock market but fear taking too much risk is that trading futures contracts offer lower entry barriers than traditional stocks or other securities. The initial investment required to open a stock trade is often much more significant than the amount of money needed to buy into an exchange-traded fund or other similar product, making it difficult for many people who are new to investing to reap their benefits right away. With futures contracts, on the other hand, you can open your position with as little as $100 by taking advantage of tight trading margins.

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6. Fewer Restrictions:

Another one of the best reasons to trade futures contracts instead of stocks is fewer restrictions. Traditional stock trading requires that you open an account with a brokerage firm, go through KYC (know your customer), and face expensive withdrawal fees in case you want to stop trading after opening an account. On the other hand, futures contracts do not require such red tape. There’s no need for brokers or paperwork whenever you want to close or reposition your position; all it takes is a few clicks from your computer screen, and you’re ready to go in just minutes!

7. More Exposure:

While some people enjoy buying and selling stocks in order to get awareness about certain companies or products they would like to support, trading futures contracts help you gain exposure to a much wider range of sectors and industries without having to open multiple accounts with various brokers. This makes it easier for you to pursue your investment goals and diversify your portfolio while investing with minimal time and financial commitments.

8. Less Capital:

Unlike stocks, where the amount of money required can vary depending on which company you’re interested in, the initial capital needed to begin trading futures contracts is relatively less. In addition, this means that you don’t have to worry about taxation or reinvestment unless you start scaling up your positions over time by taking advantage of leverage and margin – an advanced feature not present in traditional stock trading.

9. Short Term:

Another unique benefit of trading futures contracts is that they’re available for different time frames, such as 2 months or 5 minutes. For instance, if you want to make money off fluctuations in gold prices, you can simply wait for two months and buy a contract before making your profit and closing your position within a couple of days. However, if you were trading stocks instead, this would have been subject to excessive taxation from the brokerage company where you have an account with! Although this can seem like a hassle due to the number of different contracts that need to be bought and sold over time, it benefits most people seeking short-term opportunities in the market.

10. Less Capital Intensive:

Trading futures contracts means investing less money to open a position. Think about it like this – with stocks, you need to set up an account, transfer money to that account, keep the minimum required amount of cash inside your brokerage account at all times in case you want to purchase shares or take advantage of margin trading features, extra fees are incurred whenever you withdraw funds from your brokerage company’s account, and everything is subject to taxation no matter which state you live in! However, with futures, there are virtually no additional costs involved when opening your position. All you have to do is pay for the contract itself and trade away without worrying about any other extra charges. Although not everyone has access to large amounts of capital to trade traditional securities well, anyone can begin investing in futures contracts regardless of how much you make or where you’re located.

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11. Unlimited Profit Potential:

The potential to make money in futures trading is virtually unlimited. It doesn’t matter how big the contracts you buy or sell are; there’s absolutely no ceiling that will prevent you from making money if you use the proper risk management techniques, such as keeping your initial investment low and scaling up your position by using margin. In stock trading, you can’t even open a position unless you have enough money to justify doing so!

12. No Margin Calls:

Trading futures contracts means there’s no need to worry about margin calls. In fact, your losses cannot exceed the initial amount of cash that you put up for a position since all it takes is a phone call to close out your position and avoid further losses. This can be especially beneficial if you’re not trading on margin, where the value of your holdings is based upon the amount of cash you have in your accounts instead of how many contracts or shares you’re holding.

13. Simple:

Trading futures contracts is considered one of the simplest forms of trading in the market. It doesn’t require an MBA to understand, nor does it take years for you to get a handle on how to trade well. All that’s needed is an understanding of support and resistance and some basic knowledge about how different types of markets work. With the right training and guidance, you can learn to trade in just a couple of months!

14. Short:

Trading futures contracts are the shortest forms of trading and require virtually no committee approvals for companies for IPOs or secondary offerings. All that’s needed is enough capital to open a position, and then market makers will match up a buyer and a seller once they’re ready to take on a contract. For established contracts, this is usually immediate. For new contracts, however, you’ll have to put up an initial margin requirement that can be as low as 5%, with the rest being paid overtime at the discretion of your broker.

15. Free Money:

Trading futures means having the ability to make FREE money – as in, cash that you never actually put into your brokerage account but still end up making or losing due to trading. How so? With futures contracts, you can use something called a margin account. A margin requirement is the amount of cash needed to open a position, and this number can vary between brokers.

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Conclusion

These are just a few of the best reasons why trading futures contracts is better than stock trading. While both stocks and futures contracts have distinct advantages over one another depending on how you look at them, trading futures has more benefits that can work towards your financial goals instead of against them. The most popular trading instruments to use when beginning your futures trading career are commodities, bonds, currencies, and stock index futures. These typically combine to give investors a good mix of short-term opportunities in the market along with stable long-term prospects. Why not begin exploring this exciting new area today?

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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: 

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 of 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 which can adversely affect trading results.

You can read more here: Risk Disclosure

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