I'd stay away from futures unless you have expert knowledge of the markets.
My purely amateur sense of futures is that by the time you and I get a sense
of the direction of movement, the leading investors and then the markets
already have this priced in. Strictly my ten cents worth.
Yes, very good advice, and i largely abide by this.
However some food for thought:
1. I've heard it suggested, and can certainly imagine it to be accurate, that few if any people on earth understand the markets, with their need for continually needlessly complicated structures, functions and products. By the time i read what I'm writing, the entropy will have increased still further.
2. For reasons only partly related to the above, I'm cautious of anyone who is referred to as an expert, or refers to themselves as such. Since the advent of Covid, we've seen a proliferation of experts and expertise far greater than covid itself! Becoming expert has an r nought in double digits!
3. Moving away from theory and into practice... Using a real example to highlight timing, expert awareness and market responses... It was in late December 2019 (i was in munich) that i first became aware of what we know now as covid19. I recall as i walked out the back of munich pullman 50 meters to the apothecary and asked for a dozen face masks. Not only was the young kraut impudent enough to not speak perfect english, but when i made motions for a face mask i suspect she had flashbacks of a glad wrapped golden shower incident and retreated behind the counter. No mask for me!
It wasnt until i found myself in Budapest a week later... And i remember it to the minute as i was flipping channels on the hotel tv trying to find the bills vs texans nfl wildcard game, which Google tells me was on at 10.35pm budapest time on sat jan 4th, that i saw a small ticker story on what from memory was the rt news channel, mentioning a spate of flu like illnesses appearing in Wuhan. January 4th was long, long before covid was reported as killing people, and before MSM thought it newsworthy. I'll emphasise this point... If you check global bourses and currency pairings you'll notice little volatility during most of January... For at least 3 weeks. But on jan 5th I'm traipsing around buda... Or is it pest... Having learned how to pronounce and differentiate between surgical masks and ventilator masks. I bought a sizeable stockpile.
This was not scalping... Merely preparedness for the unknown. Furthermore, with my home state of Victoria Australia being blanketed in smoke, it was prudent, as i was to fly home in a few days.
So what's the point of this ridiculously detailed and likely disinteresting waffle? Well... My OFX app tells me that on Jan 6th, when i made what i consider to be 3 very sizeable purchases of USD (my account, gf account, pension fund account), i did so at the rate of 69.1.
Here's the salient bit.... This rate was obtainable two weeks before my buy in date, and two weeks AFTER.
In other words, the markets and their experts were oblivious to what i perceived to be a highly probable black swan event. I bought more usd in early feb once the writing was well and truly on the wall. That writing had a distinctive bronze hue to it.. For it was the **** that hit the fan that created the writing on the wall. Fast forward to march and i sell my usd once it finally closes above .60, having troughed at. 55.
Now.... Whilst I've made close to 15% in less than 3 months, more importantly I've shielded my assets from substantial losses. My guess is that the ASX fell a little over 35% peak to trough, but 20% over the time i was in usd.
Hence $100 in the asx ended up as 80, whereas in usd ended up at 115. Which means in the space of less than 3 months i demonstrated that flipping in and out of USD was a 45% superior investment to riding out the shock and staying in the sharemarket.
Granted, I'm using aggregate bourse values not tailored individual stock prices.... But its a fair comparison.
My point is not to say how great this all was for me. It is to acknowledge my opportunities for improvement... Such as;
1. It took me a 10% rebound of the AUD to realise the need to sell out of USD. This eroded my gain substantially. Not only did i whittle a 22% gain down to 15, but the time in the market kept me from flipping back into the ASX, wherein i missed a further 10% or so. In other words, my techniques were not optimal, and as such i failed to generate a substantial (additional) return. There was limited precision in my timing.
2. Based on the confidence i have in my own fairly rudimentary signal / event detection and diagnosis, i would personally be quite comfortable in accepting a measure of increased risk in the hope of yielding a greater roi.... Trading through black swan events is a key pillar of my investment strategy (as opposed to tactics) and almost becomes a key differentiator for me relative to the advice and actions of others... Most notably the experts.
So... I do get the well intentioned and indeed eminently sensible advice on risk management and not venturing into what one does not understand. I have confidence in my capacity and capability to learn such things however. And i wouldnt venture into such matters essentially blindfolded.
I guess i really just need to study the nuances and vagaries of futures instruments, especially with regards to the 6A futures.
If indeed the ***** in my analysis is that the futures markets and prices were far more responsive than the spot market, and this either erodes the aforementioned margins or makes the increased risk unacceptable given my own tolerance, it seems I'll need to content myself with other techniques... Betting the house... Leveraging... Etc
Or, walk over to crown casino and, as wesley snipes said, 'always bet on black'
... Wait... Didn't he do time for financial.. Ahem... Mismanagement?
If anyone has read this far... No rewards. Your life might be almost as mundane as mine for writing it!