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Profitable Future Trade
How does one go about setting up a profitable future trade? What factors go into the timing of a profitable future trade? Both fundamental and technical analysis are important when trading futures on stocks, commodities, or currencies. Traders learn the fundamentals that ultimately drive equity prices. This gives them a clear idea of the range within which it ought to trade. It also gives the trader a good idea of just how long a trend will last and, oftentimes, how abrupt a correction might be. A profitable future trade requires an intelligent set up, careful attention to market pricing patterns, skillful execution, and close follow up in order to gain maximum profits from the trade.
Analysis of Fundamentals
The eventual price of a stock is determined by the return it gives investors and the degree of security it offers. However, along the way to a given price the market speculates on fundamentals such as cash flow, rate of growth, and issues such as takeover bids. Commodities such as corn, wheat, and soybeans are priced according to supply and demand. When there is a drought in the American Great Plains or torrential rains in Brazil, there is the likelihood of a reduced harvest and higher prices. Serious commodity futures traders keep track of where the rain is or isn’t, market demand, and government support payments, all of which drive prices of agricultural commodities. Commodities such as gold are hedges against inflation. As the American dollar falls in value the price of gold rises. Gold bugs hoard gold. Gold futures traders watch market fundamentals in search of a profitable future trade.
Following Technical Signals
There are a number of profitable day trading strategies that can result in a profitable futures trade. Based on the skill set that the trader has and his or her experience he or she can follow technical trading signals like Japanese candlesticks in order to assess market sentiment and forecast market reversals. These signals work for trading futures on stocks, currencies, and commodities. Technical signals can result in a profitable future trade because market price patterns repeat themselves. This was discovered by rice traders in ancient Japan. When price patterns seem confusing the Candlestick trader or other technical trader often sees a pattern amid the market static. Signals such as the Doji, Shooting Star, and Hammer signal can predict market turnarounds when fundamentals are confusing. These and similar signals can often lead to a very profitable future trade simply based upon an assessment of market sentiment.
Picking Which Futures to Trade
Futures traders fall into two categories. Companies that mine gold, buy things from foreign companies, or seek to hedge risk in their business typically limit their options trading to the field in which they do business. However...