Futures Trading Strategies that You Might Not Know

Predicting the value of a commodity or an index at some future date is essentially involved in futures trading. To benefit from the rise and fall in prices investors in this market employ useful futures trading strategies. Below are some of the strategies in the market.

 

The Going Long Strategy: If an investor enters the futures with an agreement to purchase and receive the delivery of the commodity set at a particular price, an investor is said to be going long. From an expected increase in the price of futures, the investor is attempting to make profits. For example, in June you have your initial margin now at $2,000; you will buy a September gold contract that costs $350,000 for 1,000 ounces gold ($350/ounce). You are said to be going long because you are expecting the price of the gold commodity to increase in September when the contract will expire. 

Come August and the price rose by $2; so the price of your gold can be sold at $352. With this, you can already be at the verge of making money trading futures. The price of the contact will be $352,000, if you decide to sell at this month. You can make 100% profit and have a high leverage because your margin was $2,000. Yet, the price of gold may also decline by $2 and that will give you 100%. Thus, you need to actively respond to margin calls, throughout the period you are holding your contract.

The Going Short Strategy: In this approach, to sell at a certain price, you enter the futures with an agreement. You will make profits from the falling levels of prices. Thus making you earn money, you can sell high at this moment and you can repurchase the contract at a lower cost in the future. If for example, through research you have found that oil prices will go down for the next six months. You can sell your contract now and buy it again within the months when the price of oil has declined. From the declining market, if you can make profits from it you are said to be going short.

The Spreads Strategy: In going long and going short strategies, at present in order to benefit from the rise or decline of a commodity's price at a future time, you are essentially buying or selling a contractor. Another commonly used strategy in futures trading is the spreads.You need the price difference of two varied contracts of same commodity, in this approach. This strategy is the most traditional in the futures market, in trading. In comparison with the other two futures trading strategies mentioned, it is also safer. Different types of spreads are used.

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Role of the Trading Exchanges: The Futures trading is a sort of centralized marketplace which enables the auction of a specific commodity of the buyers and sellers. As per the futures trading strategies, possessing a location provides one main area for the gathering of those who are interested in auction where prices will be traded. Some commodities are sold at multiple exchange rates. To determine the price of a product you have to first observe its price at that particular exchange. Exchanges are also important as this is where the prices for electronic trading emerge. Trading exclusively via electronic trading, inhibits real time data fed to investors easily since the information is originating from a centralized location.


Standardized Futures Contracts: Trading in future involves standardized contracts for the trading commodities. This will make calculating your potential gain and loss easy when making an analysis of the kind of contract you want to invest in. Its advantage is unlike stocks it makes things easier to figure out as stocks are complicated being based on no of shares multiplied by current stock prices to vary the sum. To understand these strategies well and accomplish a successful future trading, acquiring free futures training is a must. 


Trading in a Futures Market Course: Future trading has become a most crucial part of the finance world. It has a great effect on people live as it controls the future prices of commodities like food, energy sources and raw materials. A settlement between a buyer and seller where an asset of certain quantity and quality has a price fixed for it today,including delivery and payment for the asset occurring at a specified future date is called a futures contract. So, free futures training have become necessary for all.


There are many online courses too. In this online courses total scenario and criteria of futures training is explained well in an easy manner to make it clear to all. You will be taught how money depends on the need for a certain commodity and the trade-off between wanting a commodity now instead of waiting for it at a later date of a price. Some of high demand commodities are gold, silver, oil and corn. These courses are of great help and are more preferred by the professionals in business, finance and economics who are interested in learning the concepts and practice of future trading.