I Enter Stock Index Futures Whereas the vast majority of successful stock money managers focused their analytical efforts on the use of fundamentals, futures traders, on the other hand, were considerably more oriented to the technical side of market analysis. Paradoxically, it would seem that fundamentals might be used by more traders in the traditional commodity markets, yet this was not, and is still not, the case. Futures traders realize that by the time fundamentals are generally known, they are usually factored into the prevailing price. Technical analysis tends to be the "great equalizer" between professional traders who are often privy to inside information and the individual investor who is often unaware of such information. Since the advent of affordable computer systems, the use of technical methods in futures analysis has exploded and now accounts for a vast majority of market timing studies in the futures markets. Furthermore, the often large price swings and substantial market volatility in the futures markets have contributed to the growing use of technically based computerized trading approaches, because technical indicators are more responsive to quick changes in market trends. The introduction in 1982 of stock index futures in the Standard and Poor's 500 index and the Value Line index was a major step toward the union of stocks and futures. Stock traders, who once considered futures trading risky at best or a gamble at worst, realized the benefits of using stock index futures as a hedge against a portfolio of stocks. Futures trading gained a degree of respectability after many years of suffering a somewhat tainted reputation as a purely speculative venture. Stock money managers made extensive use of the stock index futures markets as a means of smoothing out the performance of their stock portfolios by transferring risk to futures. Stock index futures trading was initiated by virtually every financial exchange throughout the world on their individual stock indices. Currently, stock index futures enjoy a preeminent position in the financial world. At the same time that trading in the traditional commodities markets has been on the decline, trading in financial futures has been on the increase. By the late 1990s, stock index futures trading was offered by virtually all major exchanges in the world. It was possible for money managers to hedge their stock portfolios by selling futures positions against their long holdings. And speculators could participate in the markets as well. preferred stock ~ foreign exchange currency trading |
|
|
|