Commonly Known Futures Trading Strategies
Predicting the future value of a product at a given date is very vital in futures trading. In order to take advantage of price changes, investors must make use of useful strategies for futures trading.
Going Long Strategies
We can you say that an investor uses the going long strategy if he agreed to acquire the delivery of a certain product with the given price. To make financial gain from the anticipated price increase of futures is the main goal of the investor.
Scenario:
Now is July and your starting margin is $2, 000; on October, you will buy a gold contract costing $350, 000 which is equivalent 1,000 oz of gold. You are using the going long strategy since you are anticipating that by September, the gold commodity price will rise as the contract expires. More of this are available at http://www.encyclopedia.com/topic/Day_trading.aspx.
The Going Short Strategy
In this strategy, the investor agrees to the commodity at a particular price. The investor is trying make profit from the decrease of prices. To make profit, the investor can sell the contract with a high price and wait till the contract price lowers. He can then repurchase the contract.
Scenario:
Through research, you found out the prices of oil will fall in the next five months. To make profit, you can see the contract now while the price is height, and in the next five months, when the oil price is low, you can purchase it again.
The Spreads Strategy
In the previous strategies (going short and going long), the investor is purchasing or selling the commodity at present so that he can gain profit from the increase or decrease of value of the commodity in the future.
In spreads strategy, the investor needs to calculate the price difference between two different contracts of the same material. It is the most used strategy in the futures market trading. It also requires the least risk that the other strategies in trading mentioned above.
There are various types of spreads being used in the market. You can learn more about this in the link.
The Calendar Spread
In this strategy, the investor will buy and sell two futures that has the same material at the same time; the price is the same but the dates of delivery is different.
Intermarket Spread
In this strategy, the investor will have two contracts on a particular month; where one contract uses the going long strategy and the other used the going short strategy.
Inter-change Spread
In this strategy, there is different futures exchanges in every position. If ever you want to know more about the Emini Day trading system, you can visit the link for it.
