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Should an amateur keep hands off Futures Contracts / Futures Trading?

Personal Finance & Money Asked on March 24, 2021

I am a total beginner in the stock market. I have bought only 1 stock so far, but later sold it with almost 30% profit.

Now as a next step, I wanted to increase my profit thanks to the leverage effect with futures contract.

My bank advisor tells me that futures contracts are for professionals only, amateurs should stay away from them. Is this general rule true?

Is there a generic rule that all amateurs should stay away from futures contracts? Or only beginner amateur traders (like me)?

One Answer

I think the obvious answer is YES, stay out until you understand what they are, how they trade, and what the risks are!

If you don't understand futures and commodities contracts, you could suddenly find yourself having to take physical possession of a tanker car of oil or a few shipping containers of wheat.

As for making 30% on a single stock trade, bully for you, my friend! If you can do that consistently over time, then maybe that's what you should stick to. (not being a smarty, just saying)

Futures and commodities contracts are affected in ways you can't possibly imagine unless you're highly knowledgeable in the subject matter they cover, and price moves can be so rapid as to take your breath away - you could be blown out of the water before you even realize what just happened to you.

If you want to play futures, try the index funds that are managed by pros. If you insist on doing it yourself, take the time, effort, and expense of educating yourself thoroughly on it first, then do a bunch of mock trades to see how you would've turned out. If that proves you can't do it, at least you didn't lose any money in the process.

Good luck!

Correct answer by SRiverNet on March 24, 2021

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