Why Traders Trade

At first glance, the answer to this question is obvious. The simple fact of the matter is that traders trade, or participate in markets, in order to make profits. But there are many aspects to this simple answer.

1. Futures Trading Requires Relatively Small Start-Up Capital
   Typically, one can get started in futures trading for as little as $10,000. In some cases
   less capital is required. Many professionally managed trading pools require from $2,500
   to $5,000 for participation. While most traders are not successful when starting with
   limited capital, this is one way to get your foot in the door.
   Futures options trading requires even less capital. Therefore, it is possible for
   the individual to begin with an even smaller amount of capital. In. most other areas,
   considerably greater capital is required.
   The small amount of capital can work for or against you -- most often against you.
2. Leverage is Immense
   The typical futures contract can be bought or sold for one to three percent of its total
   value. For example, a 100-troy-ounce gold contract at $400 per ounce ($40,000 cash
   value) can be bought for about $1,500-$2,000.
   The balance of the money will, of course, be due if and when the contract is completed
   (i.e., when you take delivery).
   In the meantime, about $2,000 is controlling $40,000. In Treasury Bill futures, the
   contract size is $1 million and the margin is about $2,500. In other words, you have
   immense potential using small amounts of money.
   This can work for or against you. It is the goal of the futures trader to make leverage
   work in his or her favor.
3. Futures Markets Make Big Moves
   Prices fluctuate dramatically almost every day. There is considerable opportunity to
   win or lose daily in futures trading. Many markets will permit potential returns of
   100% or more per day on the required margin money (i.e., money required to buy or
   sell a contract).
   This, too, can work for or against you. Where there is great opportunity, there is often
   great risk as well.
4. Futures Markets are Very Liquid
   By this I mean that it is possible to get into or out of a market very quickly. This is not
   so with many stock and real estate investments. Some speculative stocks rarely trade,
   and real estate is often hard to dispose of quickly.
   With futures transactions, as with active stock transactions, one can enter and exit within
   minutes, or even seconds. This makes the market ‘ideal’ for the speculator with limited
   capital.
   It is possible for the individual to begin with an even smaller amount of capital. In most
   other areas considerably greater capital is required. The small amount of capital can
   work for or against you -- most often against you.
5. There are not Many Secrets to Successful Trading
   In some areas of investment, you need to know either the right people or the right inside
   information. While correct inside information can be very helpful in trading futures,
   success does not depend on such information. There are few secrets to successful
   trading.
   Good trading is a skill that can be learned and, in fact, be taught very specifically, objectively
   and successfully to those willing and able to learn. Virtually any individual with
   speculative capital, self-discipline and the motivation to succeed has an opportunity to
   do so in the futures markets -- but it’s not easy.
6. There are Many Futures Vehicles
   In addition to the traditional buy and sell short positions, there are many vehicles in
   futures trading. These include options, spreads, option spreads, futures versus options
   positions and combinations of the above.

Summary
The bottom line of all futures trading is to either make money or to keep from losing it. The futures markets provide an excellent vehicle for doing this.