Futures trading is a method of speculative trading that enables investors to get contracts based on whether they think the price of a commodity will increase or fall. A commodity could be something that is bought and sold in bulk, all the way from stainlesss steel and corn to currency and oil could be a commodity you can buy and sell. Being an investor, you take out a legal contract depending on whether you think the price of a commodity rises or perhaps goes down. If you're correct, you get to gain and bank earnings. If you're incorrect, you lose the amount of money you have risked on the exchange.
Experienced futures traders will tell you that it requires a tactical mind and patience to perform effectively in Futures Trading. There are particular issues that you can do to reduce the chance of losing your investment. This does not mean that you'll always earn money; it just means that you reduce your chances of losses. Here are a few fundamentals of Futures Trading techniques.
1. Going Long
This really is one of the Futures Trading strategies that are used by investors who expect the price of a commodity to rise with time later on. Let's state that you have looked at the Futures market and the price of a commodity, oil for example, is currently selling at $100 a barrel. Your research tells you that in the next 6 months, it will be $120. Things go so well for you that 3 months in, you are looking at $20. You may cash in now and make a healthy profit on your investment for each contract you have purchased.
Imagine for a short while that in 3 months, oil is selling at $90 a barrel. You still have the option to liquidate the position and cut any further losses. Of course you could hold on with the hope that prices will rise in the next three months, but this is generally considered as high risk and is an extremely bad Futures Trading strategy.
2. Going Short
The difference between going long and going short will be the sequence of events. For this Futures Trading approach, you have to sell a Futures contract. You are selling it in the thought that its cost will drop. When it does, you will have made a gain by purchasing an offsetting futures contract in the low cost.
If the cost of the commodity increase against your expectations, you'll have made a loss.
3. Spreads
Although many people concentrate on buying short and long to make profits in Futures trade methods, there are other tactics which are known to work perfectly, and spreads is one of them. This is how it functions:
You purchase one Futures contract within a month
You sell another Futures contract in another month.
You accomplish this if you are expecting an increase in the purchase price of one Future and a decrease in the price of the other.
These are the Futures Trading strategies that actually work best. You must always be receptive to brand new Future Trade techniques and ideas about markets and their current state. While you don't want to take positions using outside advice or even recommendations, it is good to keep on top of current economical/political conditions which may affect your trading judgements.
Experienced futures traders will tell you that it requires a tactical mind and patience to perform effectively in Futures Trading. There are particular issues that you can do to reduce the chance of losing your investment. This does not mean that you'll always earn money; it just means that you reduce your chances of losses. Here are a few fundamentals of Futures Trading techniques.
1. Going Long
This really is one of the Futures Trading strategies that are used by investors who expect the price of a commodity to rise with time later on. Let's state that you have looked at the Futures market and the price of a commodity, oil for example, is currently selling at $100 a barrel. Your research tells you that in the next 6 months, it will be $120. Things go so well for you that 3 months in, you are looking at $20. You may cash in now and make a healthy profit on your investment for each contract you have purchased.
Imagine for a short while that in 3 months, oil is selling at $90 a barrel. You still have the option to liquidate the position and cut any further losses. Of course you could hold on with the hope that prices will rise in the next three months, but this is generally considered as high risk and is an extremely bad Futures Trading strategy.
2. Going Short
The difference between going long and going short will be the sequence of events. For this Futures Trading approach, you have to sell a Futures contract. You are selling it in the thought that its cost will drop. When it does, you will have made a gain by purchasing an offsetting futures contract in the low cost.
If the cost of the commodity increase against your expectations, you'll have made a loss.
3. Spreads
Although many people concentrate on buying short and long to make profits in Futures trade methods, there are other tactics which are known to work perfectly, and spreads is one of them. This is how it functions:
You purchase one Futures contract within a month
You sell another Futures contract in another month.
You accomplish this if you are expecting an increase in the purchase price of one Future and a decrease in the price of the other.
These are the Futures Trading strategies that actually work best. You must always be receptive to brand new Future Trade techniques and ideas about markets and their current state. While you don't want to take positions using outside advice or even recommendations, it is good to keep on top of current economical/political conditions which may affect your trading judgements.
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To find out more methods, I recommend this web site: http://www.atradingplan.com. Best of luck!
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