Futures trading is a method of speculative trading that allows investors to get contracts based on whether they think the value of a commodity will rise or drop. A commodity could be anything that is bought and sold in large quantities, all the way from stainlesss steel and corn to currency and oil could be a commodity you may trade. Being an investor, you take out a contract based on whether you think the price of a commodity goes up or goes down. If you’re right, you get to cash in and bank income. If you happen to be wrong, you lose the amount of money you might have risked on the exchange.

Expert futures traders will tell you that it requires a tactical mind and patience to perform effectively in Futures Trading. There are particular things that you can apply to reduce the chance of losing your investment. This does not mean that you will always make money; it just implies that you lower your likelihood of failures. Here are some fundamentals of Futures Trading techniques.

1. Going Long

This is one of the Futures Trading techniques which are used by investors who expect the price of a commodity to increase over time in the future. Let’s say that you have considered the Futures market and the cost of a commodity, oil for example, is presently selling at $100 a barrel. Your research informs you that within the next 6 months, it will likely be $120. Things go so well for you that 3 months in, you’re looking at $20. You may cash in right now and make a healthy profit in your investment for each contract you have purchased.

Imagine for a moment that in three months, oil is selling at $90 a barrel. You’ve still got the choice to liquidate the position and cut further cutbacks. Obviously you could hold on with the hope that costs will rise in the next 3 months, but this is usually regarded as risky and is an incredibly poor Futures Trading method.

2. Going Short

The difference between going long and going short will be the sequence of events. For this Futures Trading technique, you have to sell a Futures contract. You are selling it within the thought that its cost will drop. If it does, you will have made a profit by buying an offsetting futures contract at the low cost.

Should the price of the commodity increase in opposition to your objectives, you will have made a loss.

3. Spreads

Although many people focus on purchasing short and long to produce profits in Futures trade techniques, there are more strategies which are proven to work very well, and spreads is one of them. This is how it functions:

You purchase one Futures contract within a month

You sell a different Futures contract in another month.

You do this if you are expecting an increase in the value of one Future along with a decrease in the cost of the other.

These are the basic Futures Trading techniques that actually work best. You must always be open to new Future Trade techniques and concepts about markets as well as their present state. While you don’t want to take positions using outside advice or perhaps suggestions, it’s good to keep on top of current economical/political circumstances which may have an effect on your trading judgements.

To read more methods, I suggest this blog: Trading System Reviews. Enjoy!