Futures Trading Strategies (Trading Futures for Beginners)

Stock trading has developed a series of intricately nuanced practices, but none with quite as much potential as the futures contract. Futures trading is a speculative sport that pits a trader against the future of the market. In this way, futures traders are able to lock-in prices that may be sitting at a bargain today, but will move northward in the near future. This is a particularly potent strategy to tack on to an already successful growth portfolio to squeeze out additional profits in your returns.

The first place to start when considering trading futures is with a robust, index-inspired stock picking tactic. Starting here might seem like a baby step, but in order to succeed at the next level, it is important to build your trading fundamentals and maintain your buying strategy throughout your efforts to expand your portfolio. Reading about the latest tips and tricks from expert sources such as Trading Strategy Guides is really the only way to dive into the market. This is frankly critical to seeing success in other markets and trading methods. No matter the investment opportunity, learning all that you can and keeping yourself balanced are the most important tools you can arm yourself with. All too often investors get antsy when they see a price movement and overextend themselves or sell off shares too early. Learning to calm your trigger finger will help you see price swings clearly and help you to judge the best time to move on a position in order to squeeze out the highest profits available.

Choosing a few index funds to begin your foray into the stock market is a great way to get your feet wet, but the benefit of investing in a Vanguard or iShares fund doesn’t stop at the profit you are due to make while watching the share price climb over time. Keeping an eye on how the analysts at these funds pick shares and maneuver portfolio percentages each quarter is a great learning tool that you can utilize to boost your own investing skill. After all, buying into index or other sector funds will net you a gradual profit over the years. In order to maximize profits, though, you will want to pick some stocks yourself and play the market.

One you have learned some of the factors that drive certain commodity or company prices, you can begin to speculate future price movements yourself. This is where the futures market comes into play. Simply put, buying a futures contract is akin to placing a bet on a commodity’s price. Oil is a big name in the futures game. In the real world market, an oil producer aims to net the highest profits possible for the product they are sending out; yet oil is a wildly fluctuating commodity that is influenced by dozens of economic, geopolitical, and environmental factors every day. A producer might try to sell the next three or six months’ worth of oil on a fixed price contract rather than trust the market if they believe the price is likely to drop over that period. The same logic persists in the stock exchange. A futures buyer may read the tea leaves and believe that oil is primed for growth and buy a contract to purchase oil at its current price in another six months. If the value doubles over that time, the investor is able to buy at the locked in price and capitalize on the current market price when he turns around to sell the shares.

Futures trading can be a risky game. However, the potential upside for a thorough researcher can be huge given the right market conditions. For traders, futures trading is a potent tool for locking in bargain pricing on stocks that move frequently. It is a strategy that you should include in your trading repertoire to ensure your portfolio continues growing.

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