Yet every strategy, beginner or advanced, can be applied to the stock market as well.
Technical analysis is the same no matter the market.
Unfortunately, many stock investors look at futures and forex trading and assume that there is some magical force working behind the scenes that makes trading more difficult than stock investing.
The truth is a lot less magnanimous.
The misuse of leverage is the magical force that is misunderstood.
The majority of stock traders believe that they have to use the 20-to-1 leverage of futures or the 500-to-1 leverage of forex in order to trade them, and that is not the case.
Futures and forex can be traded just like stocks.
The face value of a euro contract, U.
S.
$152,000 as of this writing, can be invested in euros and an investor can make or lose money in a EUR/US contract with a lot less volatility.
The same can be said of a gold futures contract.
The face value of a gold contract is $92,000.
An investor can put up the entire $92,000, eliminating his leverage risk, and just gain or lose on the true value of gold going up or down.
Because leverage is the key factor that separates futures and forex trading from stock investing, it stands to reason that the majority of the other factors will remain the same, such as the daisy chain effect and the strategies to exploit it.
There are stocks, CFDs, single stock futures, and options, each one designed to protect the other.
If you are holding on to a long stock position, like 97 percent of all stock traders, then you can protect yourself from a downturn in the stock with a CFD or a single stock futures position.
If you are in a CFD or a single stock futures position, you could use either of these instruments to protect each other or use a stock option to protect the CFD, single stock future, or stock position.
The mechanics are identical to the futures and forex market.
This article in no means is meant to be a complete tutorial on stocks.
There are a number of great books out there that will give you an in-depth breakdown on analyzing a company's value.
The goal here is to show you that once you have come to a decision to be long a stock there are ways to protect yourself.
There is no need to watch your entire net worth evaporate while you helplessly stand on the sidelines, when there are actual tools that have been designed to help protect you.
When the dot-com bubble burst, over $7 trillion of wealth evaporated.
The majority of investors could not afford to take such a loss.
Any one of the strategies presented here could have either diminished their losses or eliminated their losses altogether, if they had just known they could do it.
Trading is a zero sum game.
Someone somewhere collected the $7 trillion, whether it was the corporations and their venture capitalists or sophisticated traders on Wall Street utilizing strategies to pick up the low-hanging fruit.
It's time that you learned how to do the same.