http://profitabletradingtips.com/trading-investing/futures-trading-strategyFutures Trading Strategy
There are a large number of profitable day trading strategies and strategies for longer time frames for trading futures. Any futures trading strategy can take advantage of fundamental market factors or technical analysis of price trends. Following trends, trading within set ranges, scalping, trading the news, and using a contrarian approach each is a viable futures trading strategy. To a large degree the strategy that a trader adopts will depend upon market conditions and his or her individual skill set.
Trends in Futures Markets
Markets go up and markets go down. Trend following in day trading or longer time frames assumes that what is going up will continue to go up for the immediate future and that which is doing down will continue to go down for the immediate future. In each case traders use technical analysis in order to assure themselves that the trend will continue for the term of their trade. This method works for both short and long term trends. Traders commonly use tools such as moving averages, channel breakouts, current price, and Japanese candlesticks in order to assure themselves that the trend will continue for a set period of time.
Home on the Range
Many times a commodity, stock, or currency pair will trade within a range. Range trading in day trading and longer intervals is a commonly futures trading strategy. Traders seek to buy at the bottom of the cycle and sell at the top. This strategy works over the long term as the economy moves between boom and recession. Range trading can also be a good futures trading strategy with a given day. When range trading the trader identifies a trading range and uses it until the stock, commodity, or currency future in question breaks out of the range.
Scalping Profits
When using scalping as a futures trading strategy one looks to profit from the difference between bid and ask prices. Even in a sideways market traders can profit from scalping in day trading or in longer time frames. In order to succeed at scalping a futures trader must pay close attention to the market, closely follow market fundamentals, and be skillful at technical analysis.
Bah Humbug!
Futures markets like all markets sometimes get carried away. The twin demons of fear and greed drive prices above or below what fundamentals dictate. Eventually the market will correct. A viable futures trading strategy is to be a contrarian. A contrarian approach to day trading and longer time intervals assumes that the market will eventually correct and that contrarian will be there to collect his or her profits. In using a contrarian approach it is important to understand the fundamentals of the equity on which you are trading futures contracts and technical analysis which will allow you to see when market sentiment is about to turn.
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