Best Futures Trading Strategy helps you understand the market‘s dynamics and the most effective approaches. With futures trading, you can speculate on potential price changes for commodities like gold, cash, and stock shares. However, it’s not always easy and can be dangerous. We’ll go over the top 5 trading strategies for 2023 in this blog post to assist you in trading more profitably and securely.
With futures trading, you can fix an early price for stocks, commodities, and currencies that you want to buy or sell later. It’s a method of projecting future costs. Trading futures can be profitable, but it can also be dangerous because prices can fluctuate suddenly. This may be the result of significant news events or shifts in the supply and demand. To maximize your trading results, it is crucial to have a thorough understanding of the market and to employ appropriate trading techniques.
In this blog, we will reveal the best futures trading strategy that every trader should know.
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Table of Contents
• Effective Futures Trading Techniques
• Top Futures Trading Methods 2023
• Futures Trading at Coinlocally
Effective Futures Trading Techniques
The best futures trading strategy can help traders decide when to buy and sell contracts. These tactics are created by combining technical and fundamental analysis. These strategies help in lowering risk and raising the likelihood of success. By adhering to these approaches, traders can steer clear of impulsive or emotional decisions and guarantee steady returns by using tried-and-true trading strategies.
You may also want to learn about Essential Forex Trading Strategies for Beginners.
Top Futures Trading Methods 2023
Futures contracts can be traded in a variety of ways. Here are a few of the options for the best futures trading strategy in 2023.
• Spread trading
Spread trading could be considered the best futures trading strategy through which you simultaneously purchase and sell futures contracts for two connected assets in an effort to benefit from the “spread”—the difference in price.
You are speculating on the difference in value between these two correlated indices, for example, if you buy a futures contract for the NIFTY Bank index, which tracks the banking industry, at INR 30,000 and sell a futures contract for the NIFTY Financial Services index, which tracks the overall financial sector, at INR 35,000.
This strategy is predicated on the idea that, despite the possibility of both indices moving in the same overall direction, there may be momentary differences in their performances that can be taken advantage of.
• Breakout trading
The goal of employing breakout trading as the best futures trading strategy is to make money off of fresh futures price swings. You will search for particular price points that a futures contract hasn’t yet crossed, such as resistance or support levels.
When the contract price surpasses certain thresholds, it frequently suggests that the trend may continue. For example, if a crude oil futures contract you are tracking has been trading at INR 4,000 per barrel for some time, and then it suddenly surges to INR 4,500, this could indicate an upward trend.
Conversely, if a futures contract for cotton you’ve been following, which had been constant at INR 20,000 per bale, slips to INR 19,000, you might anticipate a negative trend.
• Going long trading
“Going long” in futures trading means purchasing a futures contract with the hope that its price will increase before it expires. For example, you are taking a long position if you purchase a futures contract for a major automobile business at INR 500 per share, believing the stock price will rise by the time the contract matures.
This idea applies to indices, currencies, and commodities in addition to stocks. “Going short” is the antithesis of this, where you sell a futures contract with the expectation that its price will drop before it expires.
• Pullback trading
As another option for the best futures trading strategy when trading futures, pullback trading entails entering the market while prices are falling in anticipation of a future increase.
Consider a futures contract for the BANK NIFTY index that normally trades at INR 32,000 but, as a result of short-term market factors, briefly falls to INR 31,000. During this decline, a pullback trader would open a long position, expecting a rebound to its previous value or perhaps higher.
This technique is predicated on the idea that futures prices undergo periodic retracements, or brief price reversals that eventually resume their original course, rather than moving linearly.
• Order flow trading
This approach uses the volume and direction of orders for futures contracts to measure the mood of the market as a whole. For example, a spike in buy orders on a futures contract for the shares of a telecom company at INR 250 per share would indicate significant demand and could drive up the price of the stock.
On the other hand, a preponderance of sell orders may indicate an approaching decline in price. Futures traders can effectively strategy by having a thorough understanding of these order dynamics.
Futures Trading at Coinlocally
Coinlocally, the renowned cryptocurrency exchange has recently made an exciting announcement that is set to revolutionize the trading experience for its users. The platform has introduced futures trading, providing traders with enhanced opportunities to capitalize on the dynamic cryptocurrency market. With futures trading now available at Coinlocally, users can take advantage of price fluctuations, manage risk effectively, and potentially amplify their profits.
Futures trading at Coinlocally opens up a whole new realm of trading possibilities for the users. Traders can now speculate on the future price movements of various cryptocurrencies, including popular options like Bitcoin and Ethereum. Whether the market is trending upward or downward, traders can leverage futures contracts to go long or short, capitalizing on both rising and falling prices.
Advanced Risk Management:
Recognizing the importance of risk management, Coinlocally has integrated advanced tools and features into its futures trading platform. Traders can utilize stop-loss orders and take-profit orders to define their risk tolerance and protect their investments. These risk management tools empower traders to set predetermined exit points, ensuring they can limit potential losses and secure profits when specific price targets are reached.
Leveraged Trading Options:
Coinlocally’s futures trading also offers leveraged trading options, allowing users to amplify their trading positions. With leverage, traders can control larger positions in the market with a smaller initial investment. While leverage can magnify potential profits, it is essential to approach it responsibly and understand the associated risks. Coinlocally provides leverage options that cater to various risk appetites, enabling traders to make informed decisions aligned with their trading strategies.
Seamless User Experience:
Coinlocally has built a reputation for its user-friendly interface and intuitive trading experience, and the addition of futures trading maintains this commitment. The platform ensures a seamless and efficient trading environment for users to engage in futures contracts. The user interface is designed to provide a comprehensive overview of trading positions, account balances, and market data, enabling traders to make informed decisions swiftly.
Advanced Futures Trading Tips
Success in the futures trading industry can result in large gains, but failures can have very high costs. That’s the reason it’s crucial to establish a plan before you begin trading.
The following are seven strategies among which you can find the best futures trading strategy:
• Establish a trade plan
One piece of advice that just cannot be neglected is this: Before you open a position, thoroughly consider each trade you make. This entails setting an exit strategy in case the transaction doesn’t work out in addition to a profit target.
Reducing the likelihood that you’ll have to make critical choices while your money is already at stake in the market is the main objective here. It is undesirable for feelings like fear and greed to control your decisions and push you to leave a profitable position too soon or hang onto a losing one too long.
The best futures trading strategy is like a carefully wrought trading plan that includes risk-management tools such as stop-loss orders, which we will discuss below, or bracket orders, can help protect you from such errors. For example, say you bought one contract of December silver at $20.00 per ounce.
With a bracket order, you could set a stop-loss exit at $18.00 per ounce and a profit exit at $25.00 per ounce. That way, you’re attempting to limit your risk to $2 per ounce, while maintaining a profit potential of $5 per ounce.
• Protect your positions
Having a predetermined exit and the best futures trading strategy can help shield you from big opposing moves. Too many traders attempt to use “mental stops,” mentally determining a price at which they will close a position and cut their losses.
However, these are too easy to ignore, even for the most disciplined traders. To make your commitment more solid, think about using stop-loss orders. The idea is to determine a bailout point beforehand and then set a stop at that price.
You can simultaneously set a protective stop and a primary order with One-Triggers-Other (OTO) commands. Automatically, the protective stop is activated upon the execution of the principal command. This relieves you of the burden of having to continuously monitor the market and worry about timing the entry of your stop order.
But keep in mind that there is no assurance that a stop order will be executed at or close to the stop price. Stops do not always protect against losses because markets might move swiftly through them. However, most of the time, stopping will help you keep your losses in check and your emotions out of the game.
• Narrow your focus, but not too much
If you aim to discover the best futures trading strategy, avoid overstretching yourself by attempting to trade and follow too many markets. Keeping up with a few markets is a full-time job for the majority of traders.
Keep in mind that trading futures is labor-intensive and necessitates a significant time and energy commitment. For even the most seasoned trader, there is a lot to keep up with studying charts, reading market comments, and following the news.
You risk not giving any of the markets the time and attention they need if you attempt to follow and trade too many of them. Conversely, trading a single market might neither be the best futures trading strategy nor the best course of action either. There can be benefits to diversifying your futures trading, just as there are well-known benefits to diversifying your stock portfolio.
Let’s say you anticipated a drop in gold prices, but a rise in the cocoa market instead. You might be able to balance out a loss with a gain if one of those expectations turned out to be incorrect and the other to be accurate.
• Pace your trading
Don’t floor the accelerator if you’re just starting off with futures trading and you want to achieve the best futures trading strategy. When you are just starting out, there is no necessity to start trading five or ten contracts at a time. Avoid making the rookie error of utilizing your whole account balance to buy or sell as many futures contracts as you can.
You should refrain from building up a sizable position where one or two poor transactions could completely wipe you out financially because occasional drawdowns are unavoidable.
Instead, avoid the extra strain that comes with maintaining larger positions by beginning cautiously with one or two contracts and developing a trading system that way. Adjust your trading as needed, and if you discover a profitable method or style, you might want to consider putting in a bigger order size.
If you’re a seasoned trader who has had difficulties, or if you’re a novice, you may want to think about reducing the size of your contracts. For instance, you could buy E-mini contracts from CME Group if you wanted to trade S&P 500 futures.
The term “E-mini” refers to the fact that these were initially intended to be one-fifth the size of a typical contract. (The E-mini contract for S&P 500 futures is $50 times the index value; the normal contract, which is no longer offered by CME, was $250 times the index value.)
But they also sell Micro E-mini contracts for the same index, with a contract size one-tenth of the flagship E-mini, or $5 times the value of the index. For a wide range of sectors, there are alternative Micro E-mini products with the same one-tenth contract size.
You can gradually raise your order size once you’ve settled on a plan that works for you.
• Think long—and short
There are trading chances in markets that are rising and declining, among which you can pick up the best futures trading strategy. Finding opportunities to purchase or “go long” in the market is inherently human. However, you may needlessly restrict your trading opportunities if you’re not willing to “go short” in a market.
Here’s one instance: Assume a trader sees a decline in the price of crude oil and decides to take a position by selling December futures at the current $50.00 per barrel. Should the futures price drop below $50.00 per barrel, the trader hopes to repurchase the futures contract at a later date profitably.
You can purchase or sell the market using futures. To end your position, you can first buy and then sell a contract. Alternatively, you might buy a contract after selling to balance your position.
The transactions are identical in terms of functionality: You will need to post the necessary margin for the market you are trading in, regardless of the order you sell or purchase. Thus, don’t pass up chances to go short. This is still another policy to find the best futures trading strategy.
• Learn from margin calls
A margin call is likely the result of sticking with a losing deal for an extended period of time. Therefore, take into account viewing a margin shortfall as a warning sign that you have grown emotionally invested in a position that isn’t performing as expected.
Learning more about Trading Psychology could help you make more rational decisions.
You can consider fully leaving the losing trade rather than sending more money to cover the call or reducing the size of your open positions to lower your margin requirement. “Cut your losses,” as it is said in trading lingo, and search for the next trading chance.
• Be patient
In addition to employing the best futures trading strategy, avoid losing sight of the bigger picture of trading because you are too focused on the current market movement. Naturally, you should keep an eye on your open positions, working orders, and account balances.
However, don’t cling to every market surge or decline. You run the risk of driving yourself insane in addition to being thrown by little whipsaws or zigzags that, while seeming big and important at the time, are really merely intraday blips.
Put differently, make an effort to keep a longer-term view. Extending the length of your trades may be more effective than attempting to trade each market move.
Conclusion
To sum up, consider the following points if you want to comprehend the concept of the best futures trading strategy:
- To have a comprehensive understanding of the optimal futures trading strategy, take into account the following essential points:
- When to purchase and sell contracts is guided by futures trading techniques.
- The top 5 futures trading methods for 2023 are order flow, spread, breakout, long, and pullback trading.
- Trading futures carries both profit potential and market volatility risk. Know your chosen approach inside and out, and make frequent changes to your portfolio.
- Learning about the best futures trading strategy and trading futures and options is now simple by simply reading these easy tips.
