Futures: Knowing when to Buy or Sell
Fundamental analysis is very much a useful technique when it comes to
research. Fundamental analysts try to answer the question: why are prices
moving up? Fundamental factors include supply, demand, interest rates,
inventories, and weather conditions, among others. Some people find futures
hard to research because there is so much data and information on each
commodity.
While some traders favor the fundamental approach, most traders use the
technical method of determining when to buy or sell. Technical analysis is a
method of evaluating securities by analyzing statistics generated by market
activity, such as past prices and volume. Technical analysts do not attempt
to measure an instrument's intrinsic value, instead using charts to identify
patterns that can suggest future activity. If you want to learn to more on
fundamental and technical analysis, read
A Complete Guide to the Futures Markets by Jack Schwager, this is a
complete book on Fundamental Analysis, Technical Analysis, Trading, Spreads, and
Options. It's a little pricey but well worth the money.
There are also other patterns that many futures tend to follow, here are a
couple:
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Seasonal - these are patterns that occur as a result of the
differing weather conditions throughout the calendar year. An example
is Grain prices which usually tend to make their lows in September and
October and move higher in the spring and early summer. Crude oil and
heating oil prices tend to move higher from July through October.
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Cyclical - These are patterns that tend to repeat over time. The
price of wheat, for example, tends to make a low about every 8 to 10
years. The price of certain livestock runs on 4-5 year cycles. This is
no different than the 5-10 year cycles that stocks and the stock
market take.
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What is
a spread?
A simple spread
order involves two positions, one long and one short. They are taken in the same
or economically related commodities. Prices of the two futures contracts
therefore tend to go up and down together, and gains on one side of the spread
are offset by losses on the other. The spreaders goal is to profit from a change
in the difference between the two futures prices. Is virtually unconcerned
whether the entire price structures moves up or down, just so long as the
futures contract he bought goes up more (or down less) than the futures contract
he sold. Spread trading may not be less risky than an outright long or short
position. For more detailed information on spread trading please consult with
your Orion Futures Group broker.
Placing your order properly will enable
you to save time and reduce the possibility of making and error, which can cost
you money. The markets may be trading fast or experiencing heavy volume. This
will slow down the reporting of fills since the floor brokers main priority is
to enter new trades and report the fills back when things are not so busy. If
you ever have a question about a particular fill price or anything else
regarding your account activity, do not hesitate to contact your broker.
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Summary and Resources
It takes no more time to see the good side of life than to see the bad.
-- Jimmy Buffett --
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