January Natural Gas Contract

Discussion in 'Energy Futures' started by spb001, Dec 7, 2009.

  1. spb001

    spb001

    Hello everyone. I am very new to trading so bear with me. I started paper trading a few days ago and today was the best day by far. Before I go further I'll tell you a little about myself and post my paper trading data.

    I am a petroleum engineer that just graduated this year. I am working in the Appalachian Basin specifically in the Marcellus Shale.

    Trading Data
    Balance
    $2,592.00

    Profit/Loss
    $1,210.00

    % Change
    7.93%

    Margined Amount
    $13,598.00

    Maintenance Amount
    $7,250.00

    % of Account Margined
    83.99%

    % of Account Maintenanced
    44.78%

    I've been doing non-stop research in commodity trading, and have not been able to find some key info.

    1. How does margin and leverage work and what are the equations involved?

    2. I lost several thousand dollars the 1st few days, but when I made the profit today I had increased my total account worth from 15000 to 16210 dollars. How did I make up the losses of the previous days plus increase my initial account total if I only made 1210 dollars in profit? I am very confused about that.

    3. If anyone can mention books, sites, etc that could give me useful knowledge to help me with understanding commodity trading terms, technical analysis, and other stuff; I would be grateful.

    Regards,

    Sam
     
  2. 1) Texas Tech? LSU?.....Margins are generally a function of contract value and price volatility. Leverage is equal to the contract value divided by the initial margin.
    2) You're too badly "undercapitalized" to trade natural gas. Your account actually "increased" from maybe ~$10,000 up to $16,210, not the $15,000 that you believe. You took way too much "heat" on the trade. You're deceiving yourself if you believe you can "trade" that way in the market. That's part of how paper-trading can give somebody a false sense of security and market experience. You appear not to be cognizant of natural gas's contract size and price volatility. You may have had a realized profit of $1,210 but you had an account fluctuation that was much, much larger than that. Trade corn instead.
    3) Read the commodity-related titles at a public library in a wealthy suburb. :cool:
     
  3. Hi, I've never traded in commodities/futures yet, but I am good in stock and options trading. I do best with high volatile stocks.
    Can you give an example of a high volatile and of course liquid futures for trading?
     
  4. Just about everything, you name it: energy, metals, even the ag! As a matter of fact, sugar is the best performer today. When the stock market corrects itself, and who knows when that might be, you can bet the index futures to go through the roof as well.
     
  5. Hi thx, just a follow-up question:
    does it make sense to daytrade futures? Ie. opening and closing the position on the same day?...
     
  6. 1) Keep it that way.
    2) Stick with what you are "good" at. :cool: