Futures: not for the feeble
Recently I have been using a new simulator tool I found on the Internet called “virtual trade” on the CBOE website. It is a pretty nice stimulator and gives you a wide array of options of trading. You can trade options, stocks, and futures as well as xspreads ( I don’t know what these are). I bought some stocks and got fairly low gains in the account, so I bought 50 contracts on CLX10 which is the crude oil futures contract that expires in December 2010 I believe. The reason I bought the contracts on crude oil was because of a recent shortage of oil in France. I thought that since there was less oil availailble, the price of crude oil should shoot up and it sort of did. I was sitting in class and I was excited to see that my speculation had been correct. Well, in the next minute my smile was turned up side down. What had been like a 50,000 profit turned into a 69,000 loss in about 2 minutes about of time. This demonstrates an important concept of futures market: you can make a ton of money and in the next minute and lost 2 times that money in the next minute. If only I had put some stop loss orders on my trading, but I do not fully understand these orders. The only order I actually understand is the market, which is a pretty basic order saying to buy or sell something at whatever the the markets price of that thing is. If you understand stop, stop limit, and limit orders, please feel free to comment below and hopefully I will understand these orders.