What are the best financial products for traders?

Welcome to our basic training course. I hope you’re fine. Today we are going to talk about different financial products. There are numerous different financial products. But which one is best for trading. That is the question we want to answer in this video.

We want the searching for the best financial product for traders to be as simple as possible. Therefore, we follow the classical exclusion method.

Exclusion criteria

We exclusively want to trade financial products that are traded on a “real” exchange. This means that trading is supervised by state regulators, so there is honest and transparent trading.

There is the exchange, i.e., a trading venue, where private as well as institutional traders place and execute their orders. There is real supply and demand on the exchange. We call that fair trade.

But there is also interbank trading. That is, trading outside of an exchange. Here it is difficult or even impossible to say whether the price setting is fair. We are forced to trust in fair price-fixing of the bank or the broker. The costs are usually intransparent and difficult to calculate.

Exchange or interbank trading?

It’s one thing to trust but it’s better to have control. Unfortunately, we cannot control interbank trading. In addition, there is usually a conflict of interests thus trade can easily be manipulated. Either through spontaneous spread widening, artificial slippage, re-quotes or simply through unfavorable price positioning. As professional traders, we must always be aware of our costs and risks. Rates for over-the-counter products are often not transparent and fluctuate widely. There is no guarantee that the prices are correct, which is not a good basis for professional trading.

If a conflict of interests exists or is even suspected these financial products are not suitable for us. These include:

  • CFDs
  • FOREX, i.e. foreign exchange trading
  • certificates and knock-out orders
  • binary options and all other products that are not traded on exchanges.

Above-average returns, even with small or medium-sized accounts

Now we have already narrowed down the list of options.

As traders, we want to profit from rising, but of course also falling prices and thus achieve above-average yields, which allow us to generate attractive extra income even from small and medium-sized accounts.

Since the following financial products meet these criteria only to a limited extent, they are not included in our portfolio. These are:

  • Stocks
  • ETFs and funds
  • and Bonds

The performance of these products is, on average, well below our expectations compared to range markets such as commodity futures, which move up and down and which we can use to profit from both rising and falling prices - It’s a bit harder to achieve the same using stocks or ETFs. Since they go up most of the time, you need a large capital stock to generate a solid side or main income. These products are only interesting if used as an addition.

High profits through margin-based trading

By using exchange traded leverage products which only require upfront margin on deposit (not the full amount as with equity trading), we can achieve significantly higher returns. Even if the sample has become very narrow, we can continue to apply our exclusion procedure.

Best prospect of profits with a simple application

When looking at options, we have to say that this financial instrument is not only difficult to apply, but also difficult to implement. The value of an option is made up of many different ratios. You have to understand the key figures very well and their influence on the market pricing. Options trading comes with high chances, but the theory is complicated and the expected profits are lower compared to futures trading.

And that’s why for us and many other successful and active traders the best financial products are futures. While considering all the factors of different derivatives, they offer the best opportunities.

  • Futures are traded on real stock exchanges,
  • trading is government-controlled,
  • costs are transparent,
  • and pricing is fair.
  • They are much easier to deal with than options
  • They can be traded on margin, so you only have to deposit a fraction,
  • Therefore, you don’t need a large amount of capital, in contrast to stocks, to create a good income.
  • For example, the use of margin in our trading strategy is only 30 percent. The excess capital can be invested in shares or ETFs in parallel. So, you can simply add the stock performance to your income.
  • Meanwhile, more and more mini futures appear, with you can use now to start with small accounts of less than 10,000 euros.
  • We can profit from falling and rising prices, especially in the commodities markets
  • Above-average returns
  • By trading futures, we have been able to obtain an average annual return of above 70 per cent in the last seven years. In both competitions of the world trading championship, we have obtained a return of more than 100 per cent

Conclusion

As traders, we want to profit from both rising and falling prices to achieve above-average performance. At the same time, we always want to control risk and trade in a transparent and fair environment. Futures meet all these criteria and are best suited for trading. If you have a look at the financial products of the most successful traders in the world, you will notice that they are mainly engaged in trading futures. Why should we choose something less good, when futures trading is proven to work best?

Hopefully you can now see what's behind the trees, as this video is part of the basic course.

If you would like a detailed list of pros and cons, we have prepared a bonus video for you. All participants in our free basic training course will receive this video.

If you're not already a participant of this course, then I recommend to subscribe and you can watch the bonus video too, the link of course can be found below in the description.

Enjoy and see you next time.

About the author

Max Schulz is a professional futures and commodities trader. He is the founder and head of InsiderWeek. For many years he has been helping people achieve their financial goals by training them in futures trading.

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