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Top 5 Strategies and key Factors for Successful Future Trading

Success in Futures Trading is a combination of time-tested strategies and discipline. At Moneyplantfx, we promote the methods of trading that fit with the market, along with what the individual trader’s risk tolerance is to give a better chance of profitability over the long term. Whether a trader or simply beginning, these five futures trading strategies and success factors can give you an edge in the markets!

Futures Trading Strategies

Trend Following Strategy

This strategy aims to identify and trade in the same direction as the current market trend. Traders typically utilize trend indicators such as Moving Averages, MACD or the Average Directional Index (ADX) to gauge the strength and direction of the trend.

  • Buy futures contracts in a confirmed uptrend.
  • Sell futures contracts in a confirmed downtrend.
  • Use stop-loss orders to limit your risk of losing money in the event of a sudden trend reversal.

Spread Trading Strategy

Spread trading is a method that relies on taking long and short positions in related futures contracts simultaneously to profit from price differences.

  • For example you could go long crude oil and short natural gas. Another example is calendar spreads where you go long the near contract and short the far contract in a single commodity. 

This strategy requires a thorough understanding of inter market relationships and seasonal price behavior.

Breakout Trading Strategy

Breakout traders generally seek to capitalize on price movement when an asset crosses a key level of support or resistance.

  • Use historical data and charting patterns to identify these key levels.
  • Buy when price breaks above resistance.
  • Sell when price breaks below support.

This strategy has a clear entry/exit point and can generate strong trades based off momentum.

Pullback Trading Strategy

The pullback strategy allows you to enter trades during a temporary reversal in price, within a broader trend.

  • You need to wait for a retracement in the trend.
  • Once any retracement of the trend occurs, you can enter trades at known support/resistance levels just before the trend resumes.

This method allows you to place trades at a better price when you choose to get back into the trend.

Using Futures and Options as Hedges

Hedging is the risk management practice of using futures and options to hedge potential losses on the underlying asset.

  • Reduce price uncertainty and diversity
  • Take advantage of price movements.
  • This is usually not to maximize profit, but more so to ensure the stability of returns.

Key Elements of Successful Futures Trading 

1. Risk Management 

A disciplined approach to risk management is non-negotiable in futures trading. 

  • You should limit risk on each trade to no more than 2% of your total trading capital (the total amount you’re allocating to futures trading). 
  • Limit your position size and use stop losses – no excessive position sizes. 
  • Stick to your trading plan.

2. Market Analysis

Integrate technical analysis and fundamental analysis for a complete market picture. 

  • Keep track of economic gauges, interest rates, and commodity headlines. 
  • Utilize technical indicators like moving averages, volume analysis, and chart patterns at various levels for precision on entries.
  • Peruse sentiment indicators along with institutional activity. 

3. Leverage Control

Futures provide a lot of leverage—advantage and disadvantage.

  • Exercise leverage judiciously and ensure margin requirements are met.
  • Refrain from using excessive leverage, particularly in volatile times.
  • Stay within a reasonable risk-reward ratio.

4. Emotional Discipline

Trading psychology often determines your success over the long haul!

  • Avoid revenge trading and don’t let losses spark your emotions.
  • Make sure to focus on your rules-based system and don’t follow emotions.
  • Patience is key — allow your setups to naturally develop.

5. Continue Education

Markets are dynamic, you need to be flexible.

  • Watch webinars, read financial journals, and follow market experts.
  • Use demo accounts to learn your exchange strategy before you risk your money.
  • Learn from every trade outcome; there are lessons in both success or failure.

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 In Conclusion

When approached strategically, futures trading can be a very useful wealth creation tool. At Moneyplantfx, we like to encourage traders to adopt clear strategies, for which there are many opportunities, such as trend following, spread trading, and breakout trading – provided it is complemented with strong risk management and emotional control.

Select an approach, one that fits your trading style and level of experience. Adopt a consistent, disciplined plan, remain objective, and never stop learning. The futures market rewards, the prepared, the patient, and the flexible.