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.
