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Become a day trader. Strategies By Reem Heakal Share. A Brief History Futures Fundamentals: The Players Futures Fundamentals: How To Trade Futures Fundamentals: 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. Going Long 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.
By buying in June, Joe is going long, with the expectation that the price of gold will rise by the time the contract expires in September. It's also important to remember that throughout the time that Joe held the contract, the margin may have dropped below the maintenance margin level. He would, therefore, have had to respond to several margin calls, resulting in an even bigger loss or smaller profit. Going Short 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. Let's say that Sara did some research and came to the conclusion that the price of oil was going to decline over the next six months. She could sell a contract today, in November, at the current higher price, and buy it back within the next six months after the price has declined.
This strategy is called going short and is used when speculators take advantage of a declining market. But again, if Sara's research had not been thorough, and she had made a different decision, her strategy could have ended in a big loss. Spreads 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.
There are many different types of spreads, including: 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. Inter-Exchange Spread - This is any type of spread in which each position is created in different futures exchanges. Learn about the risks and rewards of trading oil futures contracts. Read about a few strategies to limit the risk in trading oil futures contracts. Leveraged products offer investors the opportunity to get significant market exposure with a small initial deposit.
Contracts for difference and spread bets offer two ways to get more leverage. Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price. Futures is short for Futures Contracts, which are contracts between a buyer and seller of an asset who agree to exchange goods and money at a future date, but at a price and quantity determined Futures investors flock to spreads because they hold true to fundamental market factors. The forex market is not the only way for investors and traders to participate in foreign exchange.
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