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Trading Forex Futures
A potentially profitable avenue for online futures trading is trading Forex futures. In general, Forex traders limit themselves to trading only major currencies. These are the US dollar (USD), Yen (YEN), Euro (EUR), British Pound (GBP), Swiss franc (CHF), Canadian dollar (CAD), and Australian dollar (AUD). One engages in trading Forex futures with the majors because these currencies trade in high volume, which makes technical signals more accurate and technical trading more profitable. There are two basic reasons for trading Forex futures. The first is to hedge currency risk in international trade. The other is to speculate on and ideally profit from volatility in the currency markets. Traders use both fundamental and technical analysis to predict price movement when trading Forex futures. Forex futures can be traded directly or one can engage in trading futures options in Forex to further hedge risk.
Futures trading strategy in Forex depends upon why one is trading in the first place. A European company that purchases lithium batteries from a Japanese company will commonly need to pay in Yen. After the company signs a contract it can pay immediately or pay at the time of delivery. Because the price of Yen when purchased with Euros may rise significantly a company will often buy a futures contract to purchase Yen at a set price. This guarantees the company a set price for their purchase. However, a speculator is not tied to a specific currency pair and can scout the market for opportunity. Trading Forex futures in the USD/EUR pair may be attractive or trading AUD versus GBP may offer greater profit potential. A currency speculator will pick and choose his or her trades and profit to the degree that he or she correctly anticipates price movement.
In general, the various profitable day trading strategies that one employs in trading stocks, options, or futures other than Forex also work in trading Forex futures. Consider range trading, trend trading, scalping, trading the news, contrarian trading, and others. In each case a trader needs to know market fundamentals and understand when changes occur. Profits in trading Forex futures will commonly depend on the skill set of the trader no matter what strategy he or she uses...