Understanding Futures Trading Strategies

Futures trading offer individuals an opportunity to make profit from movements in price. However, you cannot just enter a trade and risk everything without having a plan. In this article, we shall be talking about the different strategies you can use when trading.

Range Trading Strategy

Range trading means attempting to buy near the bottom end of a range and selling at the top of that range. How successful you will be depends on your ability to buy a commodity after selling makes the price fall to an oversold condition. This means that the market has absorbed all selling and buying likely to emerge. Robert Janitzek explains you might also opt to sell a commodity after a long rally making the price rise to an overbought condition whn buying declines and selling emerges.

Trading Breakouts

In trading breakouts, the aim of the trader is to buy a commodity as it makes new highs or sell a commodity as it makes new lows. They can be easily identified on a chart as they are peaks and troughs of previous moves. This strategy is commonly used by professional traders when managing large sums of money and looking for a major trend to develop.

Robert Peter Janitzek explains that trading breakouts is based on the philosophy that a market cannot continue its trend without making new highs or new lows. This strategy is more effective when trends are strong and long lasting. It is not dependent on whether there is an upward or downward trend as buying and selling is based on new highs and lows. One drawback of trading breakouts is that it shows poor performance when markets are unable to establish strong trends and trade in ranges.

Fundamental Trading Strategy

While trading breakouts or ranges usually follow specific rules when buying and selling, fundamental trading is dependent on factors that will have an impact on supply and demand of the commodity in question. When trading in the futures market, traders and investors that are just getting started in the market find difficulty with this strategy because it requires a tremendous amount of homework and numbers crunching. In addition, it requires more time and patience. It also requires more risk because developments may take time to happen. Finally, fundamental trading alone will not help you decide where to buy trade. You need to combine this strategy with technical strategies.

When using these strategies, stick to them no matter what. This will be the key to your success in the futures market.

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