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Anyone looking to trade basically has 3 choices : Stocks (common or options), Futures, or Currencies. There are other instuments to trade also, such as bonds and a few other exotic things - most of these are out of reach of the average trader. The most well understood is stocks, and least is probably currency pairs. Most investors and traders have heard about hte futures markets, which are not too hard to understand with a little bit of research.

First off, futures inherently have leverage far beyond stocks. Most stocks you can get 2:1 leverage overnight and 4:1 intra-day for day trading. Futures are leveraged by default because of how they are constructed. This can be a double edged sword when it comes to risk and reward. For one, you can trade futures and have a reasonable rate of return with as little as a few thousand dollars. Stocks this is not possible (unless you delve into the murky waters of penny stocks). This causes returns to be amplified UP (gains) and DOWN (losses). It is not unreasonable to have $5000.00 in your account and on a single trade make or lose $300-$500 depending on which future you trade - a 10% return (or loss!) on your principal investment in the account. If this type of risk makes you nervous - then futures are not for you.

A second point to remember is that futures lead the stocks through the pushes higher and the seloff's. This can create volatility which means lots of trading opportunities. With this action comes the forced nature to think quickly. Traders often only have a few seconds to decide to go in and place an order or they miss the move. It is also desirable to anticipate a direction and have an order in ahead of time. Again, this requires skill and fast thinking. If this is not your strong suit, or you are very analytical, futures day trading or swing trading is probably not for you.

As a final note, you must be able to figure out risk levels and stops very quickly, making them almost second nature. You cannot enter a position and then think about where your stop should be and where your target should go. You should already know this before entering the trade. Since futures are leveraged a lot, you should always assess the stop first (read risk level) and determine the odds of that stop getting hit in the next 10-15 minutes BEFORE actually placing a trade. Why 10 or 15 minutes only?? Most trades people do in the futures market on average only last this long, unless they are swing plays. Most futures traders choose not to hold overnight - there is risk of gaps and additional overnight margin requirements because of this risk. Traders close out positions at the close of each day.

Most people have heard of the futures market, and it does get mentioned on news shows such as CNBC or MSNBC. A lot of people just don't understand what exactly the futures market is. Learning how to utilize it properly will help with entry timing when day trading, swing trading, and even investing (after all, who wants to be down immediately after entering a position?)

It’s actually quite simple. The futures market is simply a bet on where an index will be as of a specified date in the future (hence futures market). That is not any different than having the opinion "I think GE will be 3 points higher in 3 months". Now imagine thousands or people, or even hundreds of thousands all betting on where GE will be in 3 months. Not tomorrow, 3 months from now.

This aggregate valuation call would be considered a futures market. It could be higher or lower than where it is now, but you also have to remember that there is 3 months time to be right. This time has a value - the more time you have to be right, the easier the call is. So the market puts this time value into the price of the futures, and each day that goes by a bit of it decays (goes away) as it gets closer to the 3 month time. This short 3 month time frame in this example is a fixed amount of time, it does not scroll forward or get bigger. So if the bet is a close of at least X price by july 31st, 2 weeks from now the date to be right is the same but the time left is less.

If this still seems confusing, think about this example:  Every day an analyst says “The market will fall 300 points today." if that happens in just a day, he gets paid a bonus of $40,000.00.  The more days you give him to be right, eventually, even just by random chance, he will be right.The time increase you might give a person to be right would actually decay the value of the prediction being right.  Lets say you give him 1 month, but he is now only paid $10,000.00.  If you give him 3 months, that is only worth $1000.00 and so forth, this is a type of time decay.

This basic concept is then carried over to the stock indexes. Traders and investors place bets based on current and anticipated information and research for what they think the value of the index wil be in the future. One thing to remember is at the expiration date, the futures contract AND the cash contract (the index) will be identical. So if the S&P 500 index is at 1400 on expiration, so will the futures contract trade to this price. Because of this, that difference can be arbitraged between the two (cash and futures) since they trade separately. I can make a bet on the futures market (buying or selling) without doing anything with the cash index. In just the same way, I can buy a large basket of stocks in the index without touching the futures market. This give and take causes the 2 of them to fluctuate independently.

If the futures get too high (people buying futures but not stocks), there is free money there since at expiration futures and cash are equal. The idea is to sell the futures and buy the basket of stocks that comprise the index and lock in the free money if held until expiration. There are whole other program trades that simply day trade stocks vs futures all day long based on the premium to cash being too high or too low.  By selling the futures, you have agreed in principal to sell the basket of stocks comprising the index at that futures price. If the futures are 1430 and the cash is 1400, and the time value is 20, theoreticaly the futures should be at 1420. At 1430, I could place an order to sell the futures and simultaneously buy the component stocks and lock in 10 points of gain. Doing it in real time is not this easy, but the basic underlying concept is.  Anyone who wants to learn to trade needs to understand how the futures market works.

Everyone wants a shortcut to learn day trading or any other kind of short term trading - someone to teach them the “secret sauce” that will take 10-20 years of experience and allow them to come up to speed in a few months. If you needed brain surgery, would you want the guy who got his degree online in 6 months OR the guy who spent 10+ years in med school + residency + specialization? Is that even a fair question?? Well, it's lucky for everyone that trading is far harder than brain surgery … not really but it can seem like it. In actuality there are really some positive things you can do to dramatically decrease the learning curve, BUT there is no holy grail solution or indicator that can ever ever replace experience. That knowledge is learned. The one huge key to the path of winning is simply to do things that will not cause you to lose money.

First off, you really need to treat  day trading as a profession. This means act like its a real job and your only way to make money. You need a dedicated computer to trading with at least 2 monitors. Do not try to use some 5 year old computer that is underpowered. I can assure you that computer will fall behind of the task. There is nothing worse than data that falls behind (lagging) as you cannot tell where price is actually at. Trading is super data intensive, make sure you have a computer with at least the following specs:

1. A minimum dual core chip, ideally you want a quad core chip. Each core on the chip can run a separate application, and this really lessens the chance the computer will stall out. Make sure the chip has a decent amount of L2 cache. if you are not aware of what this is, ask a local computer expert to help you.

2. A minimum of 2gb of memory, the more the better, and the faster the better. If you want more than 4gb you will have to use a 64 bit operating system. Make really sure before you do this step that whatever software you plan on using is compatible. As far as memory goes, you should be fine with 2-4gb. The faster the memory the better, but no need to really pay up for special memory.

3. a separate, discreet graphics card from AMD or Nvidia. Make sure the card can handle at least 2 monitors. You do not need a high end gaming card, you should be able to get something decent for about 100-150 bucks easy. Do not rely on the built in graphics on the motherboard, they are notoriously underpowered for any graphics intensive software. Trading is extremely graphics intensive - think about real time charting, indicators, order entry, bid ask in real time etc - it adds up.

You will only need this on your main computer that will be traded on and used for charting. You want 1 dedicated screen for order entry and 1 screen for charting. If you have any other computers that are older, those are totally fine for surfing the net, getting news, IM chat and other stuff. I would always keep your trading computer as uncluttered with add on applications as possible. You do not want to be in the unfortunate predicament of the computer crashing or locking up during a trade.

You need a dedicated work area that will serve as your trading area and workplace. It needs to be setup no different than a desk in a normal working environment - phone, lights, supplies, computer, printer etc. In order to succeed at trading, you have to treat it as a real business, not as a hobby or whim or a way to get your gambling fix. A hobby is fine, but you cannot expect to become an expert unless you treat it seriously. When you are concentrating on trading, do not let outside influences distract you. This means chatting on the phone to friends, watching tv shows, and doing other things while “kind of watching” the market. If this behavior would not cut it in an office atmosphere it will not cut it for learning to trade either.

Once the office is setup, it is time to get serious about how learning the in's and out's of the market. While this blog is a great source of information, you really cannot expect to learn everything for free online. Go to amazon.com.or other sites like Trader's Galleria - search for the term "charts" or "stock charts". You want a beginning book and an advanced book on charting. In order to learn about trading, you have to figure out the mechanics of price movement and become and expert at charting. This will take some time, its not easy. As you get better at it through practice, it is much easier to learn new ideas and concepts because you have the background to understand them.

Expect learning charts to take about a year to get good, but in a month or 2 you can get a good start. Again, do not fall into the trap of thinking “if I throw some money at this, someone will show me secrets and shortcuts”. If you don't have the foundation to understand what is going on, no amount of shortcuts will fix that since you dont understand the underpinnings of how stuff works. DO NOT ATTEND ANY SEMINARS OF ANY KIND until you consider you have mastered the basic charting book on your own. IF you think you know enough to tackle the advanced book, then it is probably time to attend a seminar to learn more. Again here there is no substitute for experience. Every day you have to plan time to watch the markets live, even if its just for an hour or two - ideally for the whole day if possible.

You need to watch the market live and then once the market is closed, go over static charts as well. If your time is impacted because you have another full time job and cannot watch the market here is a secret: Get some screen capture video software (records your screen to video) and an external usb hard drive, probably 500gb will do. Open your charting program, log it on and set up a few real time charts on the screen before you go to work. Set up the software you are going to use for recording to save to the external usb hard drive. You can set up a macro (there are free programs out there that can do this, search Google) if you are not home when the market opens. Set i to record at least an hour of video of the market open and any charts you have open. At night you can then replay this recording in real time (or even speed up time) and watch for chart patterns to learn from. If this does not appeal to you, some of the brokerage firms or data vendors have market replay that can replay parts of the prior day for you.

I have not touched on one last thing - charting software. There are tons of them out there. I have my own preferences I like, but that hardly matters. You need to find what you are comfortable with. Some programs are very complicated, some are simple to use, and yet others will let you code custom indicators and trading systems. From the start, I would suggest that most people go with simple. What good is having 500 things you have no clue what they do or how they work?? All that can do is to lead to confusion and add a bunch of things that are too complicated. Just make sure its a fully robust charting package - meaning all charts are live, you can put tick charts AND minute based charts up (not delayed data, live data) AND its not web based. Web based means the program is running in a browser, rather than running as a separate executable. You want a separate, installed program - they are by far more stable, and faster by leaps and bounds for the most part. If your trading platform is integrated with the charts that is totally fine, just make sure its not web based order entry either. Its simply too slow to be of any use. Web based is totally fine for buy and hold, longer term investing. Winning at trading is about time, even 5 seconds delay can cost you 50c or more per share in lost profit if the market is moving fast. That cost is real and can result in a winner turning into a loser.

While this was not a tutorial on how to trade, I tried to touch on a few subjects often overlooked when people are trying to learn to trade. They overlook these because they either cost money (charting software, real time data, computers) or they think they take too much time so lets find a way to skip this or that part.

Every business has fixed costs that go along with the territory. If you are a trader, data costs and charting package costs are one of many. Often you can get them minimized or waived if you are active, but for probably the first year expect to pay for them as you are learning.

With the economy the way it is, more people are having to take a closer look at their personal investments.  Instead of grimacing at the thought of opening your latest mutual fund statement, you have to tear it open and understand what is happening to your money.  Although you want a bailout just as bad as the big banks and auto companies do, it is not coming.It is up to you to keep the faith and hand on until the economy digs itself out of this mess.  Learn more about personal finance and how to manage better until things start turning around for the whole country.

People are scared to be investing money online right now but right now is a good time to be how to invest money online.  There are tons of depressed properties and businesses that if you invested in now, would pay handsome returns when this nation gets back into gear.  Go to your public library and check out some books that give financial plan examples so you can see what one looks like and how you should arrange your finances.  If you see a business that has good financials but is struggling, learn how to invest in a business and talk to people. Learn all there is to know about buying now and getting your returns when the time comes.

Take a little risk and invest in some distressed companies that will make it through. But you also have to have faith that the country will turn around one day and we will come back better than ever.  It is also the people who stick their necks out a little and invest a little money now that stand to profit when America turns itself around.  And it will. 

So if you are under 60 years old, do a little risk taking and invest some of the money.Do your own homework before you invest a dime anywhere.  You don't want your money to wind up in another ponzi scheme. I am not a CPA or financial planner, talk to a financial planner before making any investment decisions.That's the standard disclaimer I have to put in.  This is just for information purposes only.

The only safe investment these days is learning buying gold bullion for a highly diversified investment portfolio. Whether or not the current bailout plan will work, how much it will cost, and when it it will be clear is currently a mystery. The actual fact of the matter is that nobody really knows what the end results will be. The bailout could be a dismal failure just pushing the country more into debt. The truth is we just don’t know yet. The world’s economy is so complicated it is virtually impossible to comprehend how and what will happen. The only thing we can do is look at what may or may not happen and plan accordingly. Only those that plan wisely will prosper in this recession.

While the future may be uncertain, there is one thing that is secure. Gold has always been, and will always be a safe haven investment. It doesn’t matter how the worlds financial system ends up, gold is here to stay.

It’s pretty clear that the rich and savvy investors are running to gold bullion. Here’s just two compelling explanations for this current gold rush:

1) Formerly secure currencies like the U.S. dollar are facing serious problems, while reserve currencies are consistently devaluing, gold is increasing in value steadily.

2) The world financial institutes demand their debts with each other be payed in nothing less than physical gold bullion, what do they know that we don’t?

Essentially, when times get tough, the tough buy gold. Trillions of dollars don’t just create themselves out of thin air. Somebody will have to deal with the consequences. A huge stress relief is when your investment is in a commodity that is as secure as possible. If the world banks keep their true assets in gold, it stands to reason that we should too.

It can’t be emphasized enough that what is being referred to here is real physical gold bullion. Fake gold comes in many forms like ETF’s and gold stocks. While these have their place in the short term investment world, you want something that will stand the test of time. Consider purchasing one or more gold krugerrands since they are recognized worldwide. Plan for 20 years in the future when you invest in gold and you will get the correct perspective.