Picture for a moment, a casino. Perhaps it’s in Las Vegas, maybe Atlantic City, heck even Monte Carlo! You locate the blackjack tables and approach one. It’s enormous and packed with players, all trying to calculate their odds at any given moment based on the cards they can see.
At a typical blackjack table, you’d see the player’s cards face up, and you’d see one of the dealer’s 2 cards, but one would be face down and hidden from view. This is the tricky spot because that card could be anything in the deck, so you have to make your best guess as to what hand the dealer might actually hold.
Back to our fictional casino. Here, the rules are a bit different! Not only can you see both of the dealer’s cards as well as all the player’s cards, but you as a casual observer get to place your bet on anyone’s hand you would like to bet on! That’s right, you get to place a bet after everyone’s initial cards have been dealt. No guessing required, you see everything transparently.
Now obviously, there is no casino that would operate like this. But the fact is that this is actually pretty similar to how things work in the futures markets for us order flow traders. We literally see what everyone is doing, at any moment, and can choose to react to it (or not!) at any time. Nothing is hidden from us, there are no “dark pools” or “market makers” as there are in the equity (stock) markets. There is no broker/dealer directly taking the other side of our trades as in Forex. The volume is pure and complete unlike the spot crypto markets. Futures is as clean as it gets and we don’t have to guess as to what is happening, because it’s all there for us to see!
In my “trading travels” over the last 20+ years, I had heard a lot of scary stories about futures. Tales of oil drums being dropped off at someone’s doorstep, of owing sums of money many, many times larger than the account being traded, and of outrageous, deadly leverage. Because of these horror stories, I completely avoided learning anything about futures and instead went down the paths most new retail traders do – options (Limited risk! Unlimited reward!), stocks (DCA and dividends, baby!), ETFs (Why buy a stock when you can buy a market??), crypto (well, ok truth be told I’m still in crypto…)
But it wasn’t until I actually met a local futures trader who showed me some of what he did, that I began to open my mind about futures and discover that my idea of what they were, was completely incorrect. And once I learned that with futures you can actually see the true, accurate supply and demand happening in real time, that it’s a completely level playing field where everyone has the same information (ignoring differences in the speed at which they get it for this discussion), that it is massively tax advantaged in the USA, and that you can use its tremendous leverage in your favor… I knew that this was the market for me as a trader.
And now today we have realtime access to data that I couldn’t dream of just 10 years ago, incredibly accurate simulators and even Micro contracts which let us “dip our toes in” without fear of them being ripped right off, this is truly in my opinion the best time ever to get involved with futures All it requires is a willingness to buckle down and do the hard work of learning to control yourself as a trader, to execute some proven setups consistently without “getting creative” and making stupid mistakes, and anyone can truly “be their own boss” and take full control of their own ship. What a time to be a trader.
Until next time, trade well!
Jonathan van Clute
Community Manager, Trading Research Group