Futures trading is like betting on what the price of things will be in the future. You can bet on things like crops, money, or other things like crypto, stock, forex, etc. But remember, it’s like a game and you need to be careful because it involves almost 90 to 100 percent risk.
Today we will cover every single point you need to know about this trading skill…
Table of contents
let me explain future trading in a deeper way with real-life example:
Imagine that you are a farmer and you grow wheat. You want to make sure you get a good price for your wheat when you’re ready to sell it, but you’re worried the price might drop. So, you enter into a futures contract with the buyer. This contract says that you will sell a certain amount of wheat at a certain price in the future, say 3 months from now.
Now, let’s say the price of wheat goes down by the time you’re ready to sell. no worries! Since you have a futures contract, you can still sell your wheat at the higher price specified in the contract. You have saved yourself from potential losses!
On the other hand, say that the price of wheat has increased. Lucky you! You can still sell your wheat at a lower price than was agreed in the contract, while others are buying at a higher market price. You have made a profit!
This concept also applies to other things, such as currency or commodities. Traders try to predict whether prices will go up or down and place bets accordingly.
It’s important to stay informed, analyze market trends, and be wary of fake predictions or rumors. Find reliable sources of information, do your own research, and make informed investment decisions based on careful analysis.
To get started, you’ll need to open an account with a brokerage firm that offers futures trading. Once you have an account, you can choose the specific futures contract you want to trade. Each contract represents a certain amount of the underlying asset. For example, in the case of cryptocurrencies, a futures contract may represent a specific amount of Bitcoin or Ethereum.
When trading futures, it is important to carefully analyze market trends, study factors that may affect the price of the underlying asset, and make informed decisions. It is also very important to manage risk by setting stop-loss orders and having a clear understanding of potential gains and losses.
Keep in mind that futures trading involves risks, and it is advisable to start with a thorough understanding of the market and a well-defined trading strategy.
Let’s dive deeper into some important future trading strategies!
This strategy involves identifying and trading established market trends. Traders look for assets that are consistently moving up or down and aim to ride the trend for potential profits. It’s like catching a wave and riding it until it loses momentum.
With mean reversion, traders focus on assets that have deviated from their average price. The idea is that prices tend to revert to their average over time. Traders look for opportunities to buy when prices are below average and to sell when prices are above average.
Breakout trading involves capitalizing on price movements when an asset crosses a critical level of support or resistance. Traders look for breakouts above resistance levels or below support levels. This is like catching a breakout from the cage, expecting the price to move in that direction.
The purpose of spread trading is to take advantage of price discrepancies between related assets. Traders simultaneously buy and sell two related assets, such as different futures contracts or options, with the expectation that the price difference between them will narrow or widen. It is like playing a game of spotting price imbalances and taking advantage of their corrections.
Remember, these strategies are not foolproof and require careful analysis, risk management, and adaptability to market conditions. It’s important to stay updated with credible sources of information, analyze charts, and consider market trends before making any trading decisions.
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Let’s take a bit deeper dive:
- Binance Futures is known for its user-friendly interface and a wide range of futures contracts to choose from.
- BitMEX is known for its high-leverage options and advanced trading tools. Bybit is also loved by many traders for its intuitive platform and competitive fees.
- FTX is gaining popularity due to its innovative features and diverse selection of commercial products.
To choose the best platform for you, it is important to consider factors such as user experience, security measures, liquidity, fees, and customer support. Take your time to explore each platform and read reviews to better understand their strengths and weaknesses.
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