What are managed futures? Basically, they are trading accounts that are managed by a Commodity Trading Advisor (CTA). A CTA should be a person registered with the regulatory bodies for the United States commodity futures industry: the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). CTAs offer investment programs which are usually based on managed futures strategies that involve trading in global financial, commodity and/or currency futures. Unlike a commodity pool, the CTA manages individual trades for a client’s account. These services are available for various fees and incentives for the manager that will be contained within the CTAs disclosure document.
Most managers will look at trading strategies that incorporate technical analysis, fundamental analysis, or both. Technical analysis relies on finding price or statistical signals from prices of futures markets to locate the potential for a gain or loss that can be traded for a try at profits. Fundamental analysis focuses on market forces like supply and demand, weather, geo-political events, and other economic forces. While neither of these managed futures strategies are guaranteed to produce a profit, they normally indicate what kind of trading you might see with a particular commodity trading advisor.
Systematic trading or trading strategies that combine both kinds of analysis may work in a variety of markets and commodity trading advisors have more than a few to work with. Some whole portfolio approaches may combine several kinds of commodity futures markets. There are grains, softs, currencies, interest rates, metals, energy products, and even equity indices.
It is important that you understand some of the basics of commodity futures trading before engaging in a relationship with a CTA. There are subtle and significant differences between futures trading and other types of investing you may have participated in. There are also significant risks of a loss associated with all futures and options trading. There are no guarantees no matter if you are managing your money or using a CTA. Futures and options may be bought (going long) or sold (going short) and each of those positions may carry a particular level of risk. Learn about futures trading and about options trading strategies and understand what the managed futures trading strategy is all about.
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Trading in futures and options involves a substantial risk of a loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.