Futures Trading Strategies

Futures trading can be difficult if investment strategies are not defined and applied properly. Some point to the fact that futures market is also referred to as a ‘zero sum’ game. This means for every profitable trade, there is an equal losing trade.

If you are planning to engage in trading futures, it will be very useful to understand the mechanism behind it. Expanding your knowledge and arsenal of investment strategies before executing trades increase the prospect of success while lowering the chances of losing your funds profit.

The Basics


There are three fundamental strategies you should consider upon engaging in futures trading:

Go Long


‘Go long’ means that if an investor expects the price of a particular commodity to increase over  given time, he or she may profit by buying futures contracts. However, if the price declines, the trade will result in a loss.

Go Short


‘Go short’ is the opposite of going long. This strategy profits from an expected decrease in price. Instead of buying a futures contract, you sell it. It practically means that if a commodity price goes down, a profit can be realized by later purchasing an offsetting futures contract at a lower price.

Spreads


A spread involves trading at least two different contracts in tandem. It is the buying of a futures contract in one month and selling another futures contract in a different month. The purpose is to profit from an expected change in the relationship between the purchase price of one and the selling price of the other.

When you expect a change in both the buying and selling prices, you can take advantage of these price changes to generate profit. You can go long on one contract and short on the other, or you can buy and sell two independent future contracts at the same time with different dates of delivery.

Using Stop Orders


It is essential to make a stop order for your trades. It puts limits on the amount of money that you are willing to lose in futures trading. Stop order is where your broker buys or sells your futures contract whenever its price hits your limit.

To conclude, you may use various kinds of spreads and additionally more complex futures trading strategies to generate high returns. But first, you ought to fully understand the risks involved to avoid heavy losses.

*Information above cannot be considered as an investment advise and past results do not indicate future performance.
**Investors should have experience and understand the risks of losing all the initial investments

Share:


Related

Navigating the Trustworthiness of Forex Trading

Navigating the Trustworthiness of Forex TradingFor active traders and investors, mastering the art of trading volatility is a crucial skill. Volatility, in financial terms, refers to the extent to which asset prices fluctuate over time. High volatility markets experience rapid price swings...

SGX Nifty: Unraveling its Role as a Leading Indicator for SGD Traders

SGX Nifty: Unraveling its Role as a Leading Indicator for SGD TradersThe global financial market operates as a dynamic ecosystem, where understanding the connections between different market movements can provide invaluable insights for forecasting...

Forex Trading with FXTM: A Comprehensive Guide for Beginners

Forex Trading with FXTM: A Comprehensive Guide for BeginnersThe forex market, also known as the foreign exchange market, stands as the largest and most traded financial market globally. FXTM is committed to equipping our clients...

Cryptocurrency Trading: Strategies for Success

Cryptocurrency Trading: Strategies for SuccessCryptocurrency trading has rapidly grown into a bustling and dynamic market that attracts traders from around the world. With the potential for significant profits...

Celebrating an Eventful Year: Octa's Milestones in 2023

Celebrating an Eventful Year: Octa's Milestones in 2023The year 2023 has been a landmark period for the international broker Octa (formerly known as OctaFX), characterized by significant achievements and substantial contributions...

Elevating Your Forex Trading Mastery in 2024: A Comprehensive Guide

Elevating Your Forex Trading Mastery in 2024: A Comprehensive GuideAs 2024 approaches, it presents an opportune moment for Forex traders to set new goals and elevate their trading performance. The realm of Forex trading is dynamic and challenging...

 

Suggested Forex Nominations

All Nominations 2024