Future contract trading strategies

Futures Trading Strategies are based on speculative investing. The main idea behind these futures trading strategies is based on the investors having no hold on the commodities they are trading in. Instead, a contract is signed and both buyer and sellers hold on to the contract. Because the contracts are bound to be cancelled, most dealers often do this for their convenience with the aim of making a profit. In dealing with futures trading strategies, investors use speculation on the trend of whether the commodity price will fall or rise, and this will determine the likelihood of investors gaining from such ventures. This type of futures trading strategies takes physical commodities, bonds and stocks. The main stakeholders in future trading strategies are the hedgers and speculators. The hedgers are the manufactures or producers of the commodities on sale. For example, farmers, miners, oil firms and shareholders are all hedgers. Their interest is in protecting themselves from futures changing in price of what they offer to the market. Speculators, on the other hand, are investors or private-floor traders. Examples of futures trading strategies are banks and stockbrokers. They buy future-contracts from which they make profits when the prices rise. They also sell contracts when they speculate a fall in price. You can learn more about futures and options in the blog page. Many pay attention to future trading hours as well.
Future Trading Strategies - Practical Example.
Futures trading strategies Investors give sellers a small amount called margin, usually a small percentage. Larger amounts are paid when the commodity in the market is out rightly bought. When the predictions made are right, the investors make a multiplied profit of the paid margin. The margin is a security bond. If the prediction of prices goes against the investor's prediction, the investor incurs losses. An example of futures trading strategies, consider an investor who thinks oil prices will rise and elects to spend $1,000 to get 100 barrels. If within a month the price rises by 10 percent, the associated future-contract also grow with the same percent to $1,100. Paper investment In the above example, the investor does not have to have the oil barrels in his warehouse. This means that commodity rarely gets exchanged. The contracts are just a show of agreement and expiry is the same as that of actual contracts. The clean investors especially do not have to get down with the tangible commodities to make a profit when using futures trading strategies. They also pay a lotif attention to futures trading charts.
Futures Trading Strategies - Pros and Cons.
Traders in this market are bound to make money without getting into the ground and get the basics of the commodities in which they are dealing. As explicated earlier, in futures trading strategies , the profits are high upon correct prediction. Another benefit of this trade is connected to the liquidity of the markets. Orders in futures trading strategies can be placed quickly, making the experienced investors get their money fast. Lastly, commissions in the trade are less when compared to other forms of investment. The main con of futures trading strategies is in the case of bad prediction; in this case, a loss is fast as profit, and this often discourages most investors. Consequently, futures trading strategies need a lot of speculative knowledge on the market trends. To sum it up, when it comes to futures, all the trading strategies are based on prediction of the forthcoming price of the commodities in which an investor is interested. The business being fast calls for investors to have a sound mind in making their plans. Analytical tools are essential to help prospective investors in reading and predicting upcoming trends with accuracy. Many such tools have been brought up with computer use and application. You can use many types of strategies to make money with futures trading. Here we'll discuss how to start simply with any of the four basic futures trading strategies. You can also take a future trading course.
How does buying in "Going Long" make money from an expected rise in price in Futures Trading Strategies?
Do you have reasons to expect that a commodity's price will increase soon? If so, then you would start futures trading strategies by buying contracts for that commodity now. What happens if you were right about predicting that price increase? You'll earn profits by selling those contracts when they are worth more money later. However, if the price falls instead of rising, you will suffer a financial loss. Depending on your amount of leverage, you can both lose and gain much more than your initial margin investment.
How does selling in "Going Short" earn profits from an anticipated fall in price in futures Trading Stategies?
These Futures Trading Strategies are exactly the opposite of the going-long strategy. You go short by selling your futures contract when you believe the price is about to go down soon. What happens if the price does decrease later? You can purchase the same futures contract again at a cheaper price to make money. The difference between your selling and buying prices determines your amount of profit. Both buying and selling futures contracts require the same maintenance-margin investment. Additionally, going short affects your brokerage account in the same way as the going-long strategy. These are futures trading strategies that work.
How does a spread work in futures Trading Strategies?
Usually, the average speculative-futures trading strategies transaction includes straightforward buying or selling of future contracts to profit from expected increases or decreases in prices. However, spreads are another one of many other strategies that you can use as well. Spreads profit from the difference between the selling and buying prices of two separate futures trading strategies contracts of the same commodity. When you expect a change in both the buying and selling prices, you take advantage of these price changes to make money. You can go long on one contract and short on the other, or you can buy and sell two independent futures trading strategies contracts at the same time with different dates of delivery.
How does a "Stop Order" work?
It's important to put limits on the amount of money that you're willing to lose in your futures contracts and futures trading strategies.. That's why you make a stop order, which is a plan for your broker to sell or buy your futures contract whenever its price hits your limit. You can use endless kinds of spreads and other futures trading strategies to make money. Some of them are incredibly complex, so you should only consider complicated strategies after you completely understand the risks involved. Good luck in your futures trading strategies and download some of future trading strategies pdf . Please read our other blogs about options trading strategies and stock trading strategies.
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Futures Fundamentals: Strategies.
Essentially, futures contracts try to predict what the value of an index or commodity will be at some date in the future. Speculators in the futures market can use different strategies to take advantage of rising and declining prices. The most common are known as going long, going short and spreads.
When an investor goes long - that is, enters a contract by agreeing to buy and receive delivery of the underlying at a set price - it means that he or she is trying to profit from an anticipated future price increase.
A speculator who goes short - that is, enters into a futures contract by agreeing to sell and deliver the underlying at a set price - is looking to make a profit from declining price levels. By selling high now, the contract can be repurchased in the future at a lower price, thus generating a profit for the speculator.
As you can see, going long and going short are positions that basically involve the buying or selling of a contract now in order to take advantage of rising or declining prices in the future. Another common strategy used by futures traders is called "spreads."
Calendar Spread - This involves the simultaneous purchase and sale of two futures of the same type, having the same price, but different delivery dates.
Intermarket Spread - Here the investor, with contracts of the same month, goes long in one market and short in another market. For example, the investor may take Short June Wheat and Long June Pork Bellies.
Inter-Exchange Spread - This is any type of spread in which each position is created in different futures exchanges. For example, the investor may create a position in the Chicago Board of Trade (CBOT) and the London International Financial Futures and Options Exchange (LIFFE).

Future contract trading strategies.
The price of an option is a function of the variance or volatility of the underlying market. Spreads While most speculative futures transactions involve a simple purchase of futures contracts to profit from an expected price increase—or an equally simple sale to profit from an expected price decrease—numerous other possible strategies exist. Some traders exclusively sell options to take advantage of the fact that a large percentage of options expire worthless. 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. This is true when the fear index or the VIX volatility index starts to rise.
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Futures Trading Made Simple - Lesson 1 - Basic Buy/Sell Strategy.
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Expected Price Increase.
Someone expecting the price of a particular commodity to increase over a given period of time can seek to profit by buying futures contracts. If correct in forecasting the direction and timing of the price change, the futures contract can be sold later for the higher price, thereby yielding a profit.1 If the price declines rather than increases, the trade will result in a loss. Because of leverage, losses as well as gains may be larger than the initial margin deposit.
Price per Value of 1,000.
barrel barrel contract.
oil futures contract.
oil futures contract ______ ________.
Suppose, instead, that rather than rising to $16 a barrel, the July crude oil price by April has declined to $14 and that, to avoid the possibility of further loss, you elect to sell the contract at that price. On the 1,000 barrel contract your loss would come to $1,000 plus transaction costs.
Price per Value of 1,000.
barrel barrel contract.
oil futures contract.
oil futures contract _______ _________.
Expected Price Decrease.
in the same way.
at 1200. Each one point change in the index results in a $250 per contract profit or loss. A decline of 100 points by November would thus yield a profit, before transaction costs, of $25,000 in roughly three months time. A gain of this magnitude on less.
than a 10 percent change in the index level is an illustration of leverage working to your advantage.
S&P 500 Value of Contract.
Index (Index x $250)
contract ______ ________.
S&P 500 Value of Contract.
Index (Index x $250)
contract ______ ________.
While most speculative futures transactions involve a simple purchase of futures contracts to profit from an expected price increase—or an equally simple sale to profit from an expected price decrease—numerous other possible strategies exist. Spreads are one example.
months, the price difference between the two contracts should widen to become greater than 5¢. To profit if you are right, you could sell the March futures contract (the lower priced contract) and buy the May futures contract (the higher priced contract).
Assume time and events prove you right and that, by February, the March futures price has risen to $3.60 and the May futures price is $3.75, a difference of 15¢. By liquidating both contracts at this time, you can realize a net gain of 10¢ a bushel. Since each contract is 5,000 bushels, the net gain is $500.
November Sell March wheat Buy May wheat Spread.
$3.50 bushel $3.55 bushel 5¢
$ .10 loss $ .20 gain.
Gain on 5,000 bushel contract $500.
illustrated would have resulted in a loss of $500.
These are beyond the scope of an introductory booklet and should be considered only by someone who clearly understands the risk/reward arithmetic involved.
Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.
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Trading futures and options involves substantial risk of loss and is not suitable for all investors.
Past performance is not necessarily indicative of future results and the risk of loss does exist in futures trading.
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