Futures trading is a technique of speculative trading that enables investors to take out contracts depending on whether they believe the price of a commodity will rise or drop. A commodity can be something that is bought and sold in large quantities, 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 goes down. In case you are correct, you get to cash in and bank profits. If you happen to be incorrect, you lose the amount of money you have risked on the exchange.
Expert futures traders will tell you that it requires a tactical mind and patience to do well in Futures Trading. There are certain things that you can do to reduce the chance of losing your investment. It doesn't mean that you'll always earn money; it just means that you reduce your chances of failures. Here are some fundamentals of Futures Trading techniques.
1. Going Long
This is one of the Futures Trading techniques that are employed by investors who anticipate the cost of a commodity to rise with time down the road. Let's say that you have looked at the Futures market and the cost of a commodity, oil for example, is currently selling at $100 a barrel. Your research informs you that within the next six months, it will likely be $120. Things go very well for you personally that three months in, you are looking at $20. You may cash in right now producing a healthy profit in your investment for every contract you may have bought.
Imagine for a moment that in 3 months, oil is selling at $90 a barrel. You've still got the option to liquidate the position and cut any further cutbacks. Obviously you can hold on with the hope that costs will increase in the next 3 months, but this is generally regarded as high risk and is an extremely bad Futures Trading method.
2. Going Short
The difference between going long and going short is the series of events. With this Futures Trading strategy, you need to sell a Futures contract. You are selling it within the belief that its cost will fall. When it does, you will have made a gain by buying an offsetting futures contract in the lower price.
If the price of the commodity increase in opposition to your expectations, you will have made a loss.
3. Spreads
While many people concentrate on purchasing short and long to make profits in Futures trade techniques, there are other tactics which are proven to work perfectly, and spreads is one of them. Here is how it functions:
You purchase one Futures contract in one month
You sell a different Futures contract in another month.
You do this if you're expecting an increase in the purchase price of one Future and a drop in the price of the other.
These are the basic Futures Trading techniques that actually work best. You should always be open to brand new Future Trade techniques and ideas about markets and their present state. While you don't wish to take positions using outside advice or recommendations, it is good to keep on top of current economical/political circumstances that may affect your trading decisions.
Expert futures traders will tell you that it requires a tactical mind and patience to do well in Futures Trading. There are certain things that you can do to reduce the chance of losing your investment. It doesn't mean that you'll always earn money; it just means that you reduce your chances of failures. Here are some fundamentals of Futures Trading techniques.
1. Going Long
This is one of the Futures Trading techniques that are employed by investors who anticipate the cost of a commodity to rise with time down the road. Let's say that you have looked at the Futures market and the cost of a commodity, oil for example, is currently selling at $100 a barrel. Your research informs you that within the next six months, it will likely be $120. Things go very well for you personally that three months in, you are looking at $20. You may cash in right now producing a healthy profit in your investment for every contract you may have bought.
Imagine for a moment that in 3 months, oil is selling at $90 a barrel. You've still got the option to liquidate the position and cut any further cutbacks. Obviously you can hold on with the hope that costs will increase in the next 3 months, but this is generally regarded as high risk and is an extremely bad Futures Trading method.
2. Going Short
The difference between going long and going short is the series of events. With this Futures Trading strategy, you need to sell a Futures contract. You are selling it within the belief that its cost will fall. When it does, you will have made a gain by buying an offsetting futures contract in the lower price.
If the price of the commodity increase in opposition to your expectations, you will have made a loss.
3. Spreads
While many people concentrate on purchasing short and long to make profits in Futures trade techniques, there are other tactics which are proven to work perfectly, and spreads is one of them. Here is how it functions:
You purchase one Futures contract in one month
You sell a different Futures contract in another month.
You do this if you're expecting an increase in the purchase price of one Future and a drop in the price of the other.
These are the basic Futures Trading techniques that actually work best. You should always be open to brand new Future Trade techniques and ideas about markets and their present state. While you don't wish to take positions using outside advice or recommendations, it is good to keep on top of current economical/political circumstances that may affect your trading decisions.
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