Timing in Futures Trading
Being right about the direction of prices isn't enough in
futures trading. You must also be able to anticipate the timing of a price change. An adverse price change may, in the short run, result in a greater loss than you are willing to accept in the hope of eventually being proven right in the long run. For example in August you deposit initial margin of $1,000 to buy an October wheat futures contract at $3.50 anticipating that the price will climb to $3.70 or higher. As soon as you buy the contract, the price drops to $3.10. To avoid the risk of a larger loss, you have your broker liquidate the position. The possibility that the price may now recover and even climb to $3.70 or above is of no consolation. Deciding when to buy or sell a futures contract is as important as deciding what futures contract to buy or sell. Many say timing is the key to successful futures trading.
