Where do I start?

Any suggestions on where to start to learn about trading futures? I am very interested, but only know how to trade stocks and options at this point. Are there any good books, classes, seminars, etc. that would be helpful in learning the best tools/practices for futures trading?

These are some of my favorite books: Top Ranked Trading Books

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Originally posted by jenpro

Any suggestions on where to start to learn about trading futures? I am very interested, but only know how to trade stocks and options at this point. Are there any good books, classes, seminars, etc. that would be helpful in learning the best tools/practices for futures trading?

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Much of commodity, futures and index futures trading in their own rights are news based; i.e., if a hurricane's leveled Jamaica or portions of South America, chances are great you'll see prices decreasing in coffee (or Light Sweet Crude Oil and petroleum rising) traded as Arabica Coffee Futures on the New York Board of Trade, and would likely present a great shorting or selling opportunity. In other words a chance to place an order to sell contracts at the highest price and profit from a decrease in prices. When you think prices will go no lower you then would place an order on the long side as an offer to buy back the difference. The reverse is true in uptrends. Options work similarly, only you're investing or trading based on where you speculate a market will or wont go in any given timeframe, as you know.

Since news and its impact on and by investors is thoroughly random ( what may be good for the oil sector may not be considered such in transportation) and considering a valuation of a commodity or future is difficult, floor traders utilized a formula and trading plan based on it to trade commodities and futures, what they call pivots (hence the name of the board).

The pivot points are centered around the day's mean pivot, which is the previous session's high (24 hour and/or cash session only) + the low + the close (cash only) divided by three. Other pivots above the mean pivot and below it are calculated and plotted. The S designated pivots are plotted below the mean pivot and the R, above.

R1: 2 x Mean Pivot - Low
R2: Mean Pivot + (High - Low)
R3: R1 + (High - Low)

S1: 2 x Mean Pivot - High
S2: Mean Pivot - (High - Low)
S2: S1 - (High - Low)

Most if not all charting software packages offer a file to plot and update these automatically, save after holidays, in which case you would in the daily chart's data export duplicate the last cash session's data in each of the subsequent cash session dates missed. This is crucial since on Sunday at 6:00 PM U.S. EST overnight trading begins around the world. You'll end up with skew and impure numbers. On the chance you end up with a charting software that doesn't offer the pivots a) it's not worth leasing and b) an excel spreadsheet can easily be created until finding a package worth using.

Anyway the pivots, or manipulation of past prices, serve as areas of support and resistence in movements. The more times they are touched or violated the less their effectiveness becomes. Once is a near sure trade. Twice or three times is a gamble. More than three times and you're starting to guage other indicators such as an average true trading range to speculate movement.

Using Friday's pre-market as an example: the S&P (ES) gapped up (traded above the previous close), touched the day's new mean pivot for the first time and changed direction to the downside gravitating toward S1.

If you were up that early and were watching price action, if you placed an order to sell off the mean pivot and covered at S1, you would have profited 10 points. S1 was tested far too many times and sellers breached the price at S1, and went on to test S2. From S1 to S2 short: 9.5 points. After the first touch at S2 by sellers, buyers tested S1, only to find out sellers effectively made the area that of buying resistence. No matter, from S2 back to S1: 9.5 points. It's called pivot swing propulsion trading, and can provide a very good living. And it works because the premise is near universal (and because inexperienced traders often arive in the trade too late and lose their money on a reversal).

For the average true trading range to guage volatility:

http://www.investopedia.com/terms/a/atr.asp
http://www.investopedia.com/articles/trading/08/average-true-range.asp

You can use any moving average for an ATR though a weighted average will prove more true to current price action. And the pivots can be used on all timeframes, perfect for investing, though most charting software wont plot anything beyond intraday.

That's a good place to start, in my estimation. I hoped that helped a bit.

I decided to upload a .zip file containing the pivots .efs I use to save the trouble of finding a reliable, classic coding formula. It's used only for esignal, though. I'm not a coding enthusiast myself so adapting to other progs would have to rest on your own efforts and risk allotment (ADMN: Esignal's copyright you'll note in the code allows .efs code alterations but denies responsibility in the integrity and functionability resulting therefrom; so reposting the file shouldn't be a legal concern as long as it's copyrighted, and it is. If the uploaded file is against TOS simply claim it so and I'll promptly remove it - but please allow me the right. I don't like my intellectual copyright infringed. What's good for the goose is good for the gander.)

Simply upack the .zip, copy the .efs only and paste it in esignal\formulas\pivots, then load it on your chart. It may require a program or system reboot to take effect.