Understanding the derivatives market or trading using derivatives
By pringu
@pringu (151)
India
July 20, 2012 11:31pm CST
If you take a look at any economy or the amount of cash traded on stock exchanges, you could understand that, derivatives are the most actively traded instrument. Now, for those who aren't aware of what 'derivative' is? It is nothing but a terminology in stock markets used to describe an instrument or method by which some value is derived from an underlying asset or stock.
One great advantage of derivative trading is the potential it has got to fetch you heaps of cash, provided you understand the core elements of derivative trading and invest wisely! Derivative trading could be performed on equities or stocks, currencies, commodities which include gold, silver, oil etc. So as you cud see here, the versitality and diversity in options to trade derivatives makes it one of the most lucrative forms of trading on stock exchanges.
The different forms of derivative trading are ' calls and puts' , futures trading and currency derivatives. I should brief in my next discussion about the various derivative trading techniques individually with appropriate examples, so i guess you cud get a more deeper and easier understanding of what it is all about!
1 person likes this
3 responses
@Olleenz (3398)
• Indonesia
21 Jul 12
Next step of Glory ..... just kidding
Basically technical analysis on derivatives market is same (Oscillator, Fibonacci, High - Low etc.) but problem is on fundamental analysis.
In stock market, market movement based issues/rumors. No one know what truly happened inside company , except we have secret and valid information from person who work in company itself and that illegal (It call insider trading).
In commodity and currencies it little bit different.
Sometimes we can found valid information (not just rumors).
I'm not sure about what kind information we need in commodities (Never trade in this market before) but on currency, we can find plenty and valid information about various currency and release by official institution / government
Bottom lines is, in stock market we looking for micro data such like: financial report, investment progress or plan, problem inside company etc, .... who almost impossible to find without helping from insider. Commodities and currencies stand for macro data like: Whether, location (specific for commodities but I'm not sure), surplus - minus trade, Government issue, inflation, unemployment etc.
How to analysis ?? derivatives player know how ... (Too long to explain in here, dude)
@Olleenz (3398)
• Indonesia
21 Jul 12
What the ......???
This discussion talking about derivatives market ... That stand for 3 kind of market:
Stock, commodities, and currency. Why you asked me to make limitation???
Anyway, Fundamental and technical analysis are NOT great plus but that essential tool for investment, specially on derivatives market. Don't know about this or weak, just forget about profit .... 1000% you gonna loose.
You're broker aren't you, you should know about this better than anyone else
@Olleenz (3398)
• Indonesia
21 Jul 12
Just extra note:
Most of people fall in derivatives market because they stick in technical analysis only. I can understand why. This because it hard to find valid information and when you find it, it hard to analysis too .... Need good knowledge and understanding.
@pringu (151)
• India
21 Jul 12
Hi scheng, nyc to have your views. But let me ask you, are you someone who trades on opinions of someone else or you trade on your gut?
K anywez, m a gut trader, n although i have made losses, the profits that i have made as of now exceeds my losses, so i believe in my gut and the small bits of my own analysis of companies or corporates.
I do have an idol in financial markets here in our local market but, he's just someone whom i consider as an option when m totally out of ideas. More often than not my gut don't get me wrong, so i stick with my formula that helps me make the most.
However, i truly agree to your view that trading derivatives is highly risky but at the same time it's extremely high potential than cash market trading.
@AgentGulaman (3546)
• Philippines
21 Jul 12
Well, from the comments of other people in here, it seems that the derivatives market is riskier compared to the stock market itself. Can you provide me with ways on how you minimize risks. What are your portfolio strategy or risk management plan? I would really love to hear some techniques to counter risks and maintain a healthy portfolio. I am still working on with MPT. Co you have other strategies to get better gains with lower risks?
@AgentGulaman (3546)
• Philippines
21 Jul 12
I haven't delve into derivatives trading yet? Or better put, I really don't know anything about it yet. Good to hear something new to my ears. Maybe I can add it to my growing list of portfolio management. I am especially interested in 'calls and puts' and futures trading. I have heard of them but I really don't have any idea about how they work. Please enlighten me out. Thanks for sharing information out.
@AgentGulaman (3546)
• Philippines
21 Jul 12
I haven't gotten into mutual funds or bond funds yet. I am still at stocks trading and investing. But I have already explored some bank products in our country called UITF. They are bank trust products offered by the bank's treasury similar in mutual funds but is regulated by the central bank instead of the Securities Exchange Commission. I am still a beginner and I really still have to learn the vast investment opportunities there is.
@pringu (151)
• India
21 Jul 12
Hopefully i cud provide you insights into different investing opportunities out there or at least give a brief idea of what the various available resources are! I never knew securities market is such a vast subject to grasp until i startd pursuing my career in capital professional. The securities market is an unending story with lots of hidden gems to be explored!
