Futures trading is a dynamic market that presents unique opportunities and exciting challenges. Entering the market can prove to be quite a lucrative decision, but you need to understand that it’s a high risk, high reward setup.
You cannot merely get into futures trading and close deals based on your hunch – it’s a recipe for financial doom. You need to be very strategic about how you approach your trades. You need to have well thought out futures trading strategies.
However, before we go into details, you should know that regardless of how incredibly designed your futures trading plan is, you’ll never have a 100% guarantee that it’s going to be successful. Many internal and external factors can impact your gains and losses, and having a strategy simply minimizes your risks; it doesn’t eliminate them.
With this in mind, let’s take a closer look at some of the top futures trading ideas and help you choose the one that suits you best.
Futures trading – The essentials
To get started, let’s have a quick refresher on what futures trading is. Futures are standardized contracts between buyers and sellers. The two parties agree to buy/sell a product on a future date at a predetermined price. The deal is legally binding, obliging the parties to respect its terms.
Not all futures market participants want to exchange a product in the future. Investors or speculators seek to make money off of price changes in the contract itself, with no intention of taking delivery of the underlying commodity. But thanks to these risk takers there is ample liquidity making the market efficient and lively.
Of course, these are just the basics of futures trading ideas. The market is very volatile, so you need to develop a reliable plan to minimize the risks and enhance the rewards.
Best strategy for futures trading
To get into futures trading, all you have to do is open an account with a broker that offers this option. Since you‘d need to make quite an investment to enter the market, you probably need some funding from outside sources to get you started. The best strategy here is to join a funded trading platform like OneUp Trader.
Once you prove you’re a reliable trader through evaluations, you’ll get an account with enough funds to get you started, and every lucrative trade will expand your account and profits.
Get funded and open a trading account with OneUp Trader now!
These steps are relatively easy. It becomes challenging when you start trading. The only way to minimize your losses and ensure the biggest return on investment is by following established futures trading strategies. Each one comes with its pros and cons, so you might want to try out a few different ones until you’ve found the one you feel the most comfortable with.
And stick to your strategy to avoid mistakes that come with making emotional decisions.
Here, we’ll go over some of the most popular strategies.
Futures trading scalping strategies
If you’re a thrill-seeker, you might want to try your hand at scalping futures. It’s a fast-paced strategy that helps you profit from small and quick price changes in the market, such as we often see with cryptocurrencies.
When scalping futures, you’ll need to make quite a few trades a day (anywhere from a dozen to a hundred of them) if you hope to make a substantial profit. You need to think fast on your feet and make quick decisions to enter and exit the trade before the market closes for the day. It’s a stressful strategy, but it does minimize your risks since the quality of the trades isn’t nearly as important as their quantity.
At the end of the day, with scalping futures, you simply need to have more winning than losing positions. A few bad trades a day are expected here, so you’ll be successful as long as the profitable positions outnumber the bad ones.
Futures intraday trading strategies
As their name would suggest, futures intraday trading strategies involve buying and selling a contract on the same day. They’re similar to scalping futures strategies but a bit less stressful since you won’t have to make hundreds of trades a day. You’ll simply be taking advantage of the daily price volatility – futures typically close at a very different price than they open at, so you can make some serious gains.
Of course, this option is not ideal for dull markets, so look for futures with some volatility to them.
Futures intraday trading strategies can be the right choice for new traders as they provide excellent learning opportunities. You’ll need to keep a close eye on the market and study the trends and daily changes, so you’ll quickly learn how futures work.
One of the most common strategies in intraday trading is breakout trading. Here, traders take advantage of the market volatility that occurs when the price breaks out of its resistance/support levels with a certain degree of momentum. As a general rule of thumb, you’ll want to go long when the prices break above resistance levels and short when prices break below support levels.
Futures pullback strategies
Pullback strategies can offer a serious return on investment when performed correctly. Essentially, you’ll be making futures trades based on price pullbacks – occurring when the price breaks above/below the resistance/support level and reverses to its break level again.
In an uptrend, the price will break above its resistance level and retest it. Your best option here is entering with a long position as it’s expected that the futures will increase in value.
In a downtrend, the price will break below its support level then reverse. This is what’s known as a pullback, so you can enter the market with a short position and buy back the futures later at a more affordable price.
Fundamental futures trading strategies
Fundamental futures trading strategies are quite advanced, often best-suited for experienced traders with years in the industry. These strategies involve trading futures based on fundamental analysis, which considers company-specific corporate events, its organization, anticipated earnings, new acquisitions, and more.
Fundamental strategies will only show you the price direction, not the price entering level. You’ll need to rely on a combination of technical analysis and fundamental information to find the best time and price to enter and exit the trade.
Trading the range
Trading the range is a relatively straightforward process – you’ll base your trading decisions on the price’s resistance and support levels. The resistance level indicates that a market has reached its highest price point and has difficulties breaking above it, meaning that the price will likely go down. At this point, if you open a trade, taking a short position is the best option.
If a market is having difficulties breaking below its support level (its lowest price point), it indicates that the price will likely go up from the support. If you’ve been shorting the market, you can expect to make a profit. Otherwise, you should start buying at these low prices. This trend will ultimately send the prices up.
Regardless of the current market range, you shouldn’t continue trading if the market breaks its support or resistance levels.
Trend-following futures trading strategies
Trend-following futures trading strategies are often a fan-favorite as they’re quite reliable. As you might have concluded, they involve entering the market according to the current trends. You’ve likely heard the saying “buy low, sell high,” and this strategy is what this is about precisely.
If the market is in an uptrend, you’ll want to adhere to the trend buying the dips.. If it’s in a downtrend, you’ll want to sell during those swing highs when the market revores before turning down again. .
These futures trading strategies are suitable for both novices and expert traders.
Counter-trend futures trading strategies
Counter-trend futures trading strategies are the exact opposite of trend strategies. They’re best-suited for experienced traders.
Here, you’d be selling the futures during the uptrends and buying during the downtrends. You’ll gain profits by taking advantage of any possible price corrections that occur.
However, this is a very risky futures trading strategy that doesn’t often pay off. Follow the old adage and “never catch a falling knife!”
Join the OneUp Trader community to get ahead in the market
Understanding futures trading strategies takes time and effort, so you shouldn’t expect to master them all as soon as you become a trader. You need practice, experience, and intimate knowledge of futures markets.
The best way to get it is by joining a community of experienced traders. OneUp Trader is a comprehensive platform with a vast community that will help you test your knowledge and improve your trading skills. It was designed by traders for traders.
Whether you’re entirely new to the game or have years of experience under your belt, you can take advantage of all the features and capabilities of OneUp Trader and take your futures trading to the next level.