Investments in securities, stocks, bonds and even stock options, however, received considerable
attention. It is generally believed that trading in stocks has more historical justification and, therefore,
more value in an economic education.
There are, in addition, a number of other reasons for the historically diminutive role of futures trading,
few of which are valid.
Generally, objections to futures trading are based on either partial or distorted facts. So, before launching
into an explanation of precisely what futures trading is, it may be necessary to clear the decks of any
misconceptions you may hold.
First, let’s examine some of the standard objections to futures trading, so that we may have a relatively
clean slate upon which to write the new learning.
Let’s take a look at a few of these misconceptions.
1. “You Can Lose All You’ve Invested, or More, if You Trade in Futures.”
This is true. However, the key word is invested. Trading futures should in no way, shape
or form be considered an investment. As a speculation, however, the rules of the game
become distinctly different -- high risk is necessary for high reward.
Nevertheless, even ‘high risk’ does not mean that the common sense rules of good
trading and money management (to be taught in this course) should be ignored.
It has been demonstrated clearly that a balanced investment portfolio consisting both of
stocks and futures performs better, on average, than a portfolio consisting exclusively of
stocks.
2. “Trading in Futures is a Gamble.”
This is another misconception. In fact, trading in futures is, technically and
fundamentally,
no
different from trading in stocks.
The odds of being right or wrong are essentially similar. However, due to lower
margins, the odds of making money in futures are probably lower than those of making
money in stocks.
