After you open your account with a broker, you can use different tools to research futures. The evaluation process is an important one, and it will help you to thrive in trading futures.
But, you should carefully consider your demands before deciding on one method.
Group 1: Fundamental Analysis
This type of analysis means studying the underlying factors. They affect the price level of your financial assets or commodities. However, the interpretation depends on which futures market you invested in.
For example, if it happens to be Treasury Bonds. It would be a good idea to research the supply and demand. You should review the daily news about the world of economics. Also, you should analyze Federal Reserve monetary policy, and investor sentiments as well.
However, do not think that you should switch from one futures market to another one. It will not do you much good because you will not have a chance to do an in-depth study. That’s why many traders stick to one or two futures markets. It allows them to focus on their analytical ability and trading experience.
Still, some markets usually have one investor who deals with more data about the assets than you. It would mean that you might be at a disadvantage at that point. However, in some markets, that’s not as practical as it may seem.
For example, an investor could never know corn like a farmer in Nebraska. In addition to that, ExxonMobil will, no doubt, have more knowledge about the oil market than an individual trader.
That’s why it is essential to study the futures market of your choice in advance. The more you know about it and the way it works, the better are your odds of making a profit.
Also, if you are an individual trader, you are in a better position than some larger companies. Your trades will not be overwhelming, and that’s why you will have more opportunities to make a profit.
Group 2: Technical Analysis
Unlike the fundamental one, the technical analysis predicts how and in which direction the price is going to move. It uses technical pointers that help the investors predict prices and volumes.
Technical analysis has many benefits. One of them is the investor’s ability to switch markets easily. It is still better to focus on one or two. However, a technical analyst has more flexibility than a fundamental one.
Still, it is vital to learn all the techniques required for this type of analysis. Besides, you do not have to use just one of the methods. Many traders combine them into one individual approach.
Other helpful techniques and tricks
An important technique to use while trading futures is risk management. Using leverage is something that can do you both harm and good. Therefore, it is vital to protect yourself against failure. That’s why you should try to use a protective stop-loss order everytime you trade. It allows you to exit earlier and cut your losses.
Another one is diversification. That means that you do not place all your money in just one spot. It is better to make a series of small bets on the futures market. That way, you will avoid significant losses. However, you should try to diversify and grow your investment program to include other financial instruments as well.
There are also other research methods and charting platforms. For example, fundamental analysts usually look at the general news sources. Moreover, they also examine other specific ones that focus on the markets they are investing in.
In contrast, technical analysts should try to find a platform they can use for their analysis. It will allow them to examine charts, monitor their trades, and sell or buy them. Luckily, this is one of the tools brokers offer. They might give it to you for free. However, they could also ask for a monthly fee which is based on your trading volume.