How a Futures Trader Looks at Markets

If you’re already a Futures market guru, enjoy the rest of your day. Nothing to see here. But for those who might not consider themselves experts, here’s some insight into how a futures market trader, or really anyone who knows 1. There’s more than one “market” and 2. There’s more than one side to the “markets”;  looks at the markets.

First, we’ll go backwards a little bit and show you how professional traders don’t look at the market. Here’s how you’ll usually see a list of markets or other investments listed in the Wall street Journal or whatever financial source you’re used to…

Futures Market “Winners and “Losers” of 2014 YTD
(All data taken from Finviz. Performance as of 10/22/2014)

Futures Winners + LosersFutures Losers

At first glance, it appears that over half (62%) of the futures markets have negative performance on the year. Alternative investments operating in the futures markets must be getting crushed, or at least struggling, right?  Would it surprise you to know that Managed Futures is coming off of its best quarter since 2008. How can that be? Here’s one more look at the futures market performance numbers in chart format.

Up and Down Futures Charts

To a pro – this is a really weird way to look at the markets, even though they’ve trained their brains over the years to read these charts in their own manner. They understand that the majority of investors out there are likely long stocks, bonds and mutual funds; and in that world – if the price moves up, your investment in that item is making money, and if down, you’re losing money.  But for a professional trader – the concept of winning when the market rises and losing when it falls is an odd one. That happens from time to time, but they also know the feeling of winning when the market falls and losing when it rises.

So when a pro looks at how markets have done that day, or that year, or what have you – it’s completely dependent on whether they are holding that market long or short, and over what time frame. For a short term strategy, they may make or lose 15% in a year on a market that ends up the year up 0.50%.  For a longer term strategy doing typical trend following type stuff, it isn’t so much whether the market is up or down – but how much it is up or down.

For those in longer term systematic programs, like these, the YTD market chart looks something more like this:

What Market Performance Should Look Like(Disclaimer: Past performance is not necessarily indicative of future results)

[Tweet “For them – it’s about the absolute value of the move, not the direction of the move”].

For them – it’s about the absolute value of the move, not the direction of the move. Systematic guys are directionally agnostic (hey, that would be a great boat name). Their not betting on prices rising or falling, nor rising or falling a certain amount. They are betting on being able to ride a rise or a fall for a long enough time to offset (and some) any losses seen getting into false moves up and down.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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