BASIC TECHNIQUES
They're Here: Take Advantage
Trade The Dow Minis
by Jayanthi Gopalakrishnan
Risky, yes. Worth a try? Definitely.
For those who find comfort in trading equities, the thought of trading futures may be intimidating. And who wouldn't be nervous when competing against the pit traders, who come across as most aggressive? But the transition from trading stocks to futures doesn't have to be intimidating. Sure, you need more initial capital, and there's more risk involved. But in reality, trading futures is not so different from trading equities. The same analytical principles still apply. The real difference lies in the contract specifications and leverage.
When you purchase a futures contract, you are obligated to buy or sell what you purchased before the contract expires. The minimum amount for investing in a futures contract does tend to be high, but that difficulty has been resolved with the introduction of the mini contracts: the S&P mini (e-mini), the NASDAQ-100 mini, and most recently the Dow Jones mini. These contracts are smaller in size, making them both less costly and less risky. Further, they can be accessed electronically, making them a desirable product for the retail trader.
FIGURE 1: CONTRACT SPECIFICATIONS OF THE $5 DOW MINIS. It's always a good idea to be aware of the specifications, since they are subject to change.
...Continued in the November 2002 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the November 2002 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2002, Technical Analysis, Inc.