Futures trading strategies should be a must to make your futures trading profitable and foreseeing. Let's set from the definition of the strategy in total. So strategy is a plan to fulfil or a set of rules to follow during some period. Strategies can be of low-time and high-time investments.
In fact futures trading contracts' purpose is to foresee some goods price at some period of time. Futures traders employ various strategies to increase or minimize prices. There are three key futures trading strategies: <
- one is about buying while foreseeing price increase (the so called a go long strategy). e.g. You have made up your mind to buy some timber. Let's imagine that timber is cheaper in spring, and is more expensive in the fall. If you go long, you should sign a futures trading contract beforehand. If the initial price of the contract is $5,000 and the final is $5,600 you will get some $600.
- Another strategy is selling in the future in case there is a probable price decrease (well-known as go short futures trading method). If the case is again about timber and if in the fall you own a timber contract you can sell it at once and get $5,600 and in spring you can buy it for $5,000, so in the end you have some $600 as a result of futures trading.
- The third strategy is called a spread and means price dissimilarity of two futures trading contracts about the same item. This method is believed to the most temperate and includes several subcategories. The first is the futures trading calendar spread meaning buying and selling of the same contract but with a different delivery term. The second is the inter market spread, implying work at two different futures trading markets going short and long. The third subcategory is the inter exchange spread at dissimilar futures trading exchanges.
No matter what strategy you may use, any of them should provide handsome profit at its best.
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