Stock Market Archeology
Gambling is not a sustainable strategy on the stock market! Watching others superficially, or acting on casual and unsubstantiated talk, can lead to serious errors when it comes to investing. Long odds do pay off on occasion, but most talk of windfalls is likely to be full of fancy rather than fact. It is not worth taking large risks with precious capital.
How do such homilies fit in with the business of Futures in the stock market sense? No one can deny that large organizational super-structures are built on contracts to buy, sell, and deliver commodities and securities on a specific date at a determined price. How do people succeed in such ventures and could we not just copy their moves?
Contracts traded on a stock market look much simpler than they are in future. Professionals may spend their entire careers in understanding the equations behind futures, and still face some crushing errors amidst a success here and there. The stock market is about consistent value, and not speculation for recreation! The business of futures is serious and calls for painstaking effort on a daily basis: it is quite unsuitable for amateurs hoping to make a quick buck.
Purchase and Finance Managers in some companies are forced to deal in futures. This is not for personal stock market gains, but simply to even out material costs over a period of time. Organizations which make their goods and services in one currency, buy raw materials in another, and sell in a third or more, are susceptible to wild swings in their fortunes, simply due to cyclical movements in critical materials and money values. Such companies deal in futures to hedge their bets, and are happy to close a financial period with heads above water!
Professional stock market operators who make livings out of futures have relied on historic data until now. It is not easy to spot the most important independent variable to track, and real-time information about it is not always available. Rainfall, pest incidence, and confrontation between nations, are some of the uncontrollable factors about which investors in futures may not know in time.
Stochastic modeling is a durable way of conducting stock market operations in futures, but this calls for domain expertise to get the relationships between subtle qualitative developments and specific number forecasts.
Futures on a stock market are not unlike archeological excavations: it looks different on the first glance of an amateur, and needs an expert on hands and knees for a long time, carefully brushing away the covers of soil to uncover the hidden treasures!