Any person that’s interested in trading and is starting his journey has come across MANY times the word “trading strategy”. You must have asked yourself, what is a trading strategy? To simplify it, a trading strategy is a roadmap or a set of rules a trader follows while trading in any market. But what really is a trading strategy? What is the composition of a futures trading strategy?
Well, the composition of a trading strategy can vary a lot, there are a ton of different strategies and rules. And its success depends on you. But let’s see what we can find normally on one strategy.
Basic Knowledge. This may sound dumb for many but there’s a huge amount of people jumping into the markets without even knowing the basics. Take your time to learn
Historical Knowledge. The historical data of a financial asset is usually overlooked.
Rules. Every profitable trader has a set of unbreakable rules. From really generals like “Don’t trade while angry” to really focused rules like “Wait for candlestick pattern for confirmation”
Indicators. A trader’s best friend. Despite what many people think indicators for day trading are crucial for many reasons. Indicators are made of data. Historical data over time. And the vast majority of tradeable financial assets tend to repeat themselves through history.
As you can see and understand, there’s no miracle or holy grail of a trading strategy that will be 100% profitable. A profitable trading strategy depends on you, your knowledge, and your technical analysis. The most you learn, the more like is that you’ll be making money.
Setting rules, learning, and finding a futures trading strategy to follow will give you one of the best weapons to fight against a trader’s worst enemy: Emotions. With a solid strategy, you’ll know when to sell/buy, when to set a time in force or not, and a lot more. That’s why I’m going to list the most useful futures trading strategies down below.
Rather than a “complete” strategy, this is more like action. An investor buys or sells a contract expecting the price of the instrument to move up or down by expiration.
Buying or selling a contract is one of the most straightforward strategies out there, but it’s usually not used alone. Backed with other strategies and solid technical analysis. A price action pattern and a candlestick pattern are usually used and recommended too.
A calendar spread strategy is a bit more complex. These futures trading strategy consists in buying and selling a contract with the same underlying asset but with different expiration. It can get a bit confusing.
For example, as the name suggests, it’s a spread. The trader goes long in the short-term contract and short in the long-term contract. With this strategy, the investor has multiple ways to profit, since the spread can widen in a few days.
Trends are the most common thing in a chart and can be really profitable. There’s a huge amount of traders that only trade trends. They have a long record of success. But what it’s all about?
A trend-following trading strategy aims to enter the direction of the current trend and ride with it. For example, if the trend is a downtrend, most investors would go with a short trade.
Every profitable trader will tell you how necessary a good trading strategy is, and I just gave you what you need in order to have an amazing futures trading strategy. You just need to remember that whether the strategy fails or succeeds all depends on you. It’s a must that you have a deep and solid understanding of it.