THE SECRETS OF A TRADER S

Traders Futures World

The hedger buys futures contracts because he wants to protect himself from price swings in the future. By using futures to lock in a future price for a product, he makes his costs—and his profits—more predictable. In other words, he trades futures to drive risk out of his business.

But that risk doesn’t just disappear into thin air—it gets transferred to the speculator.

Meet the speculator

The speculator accepts price risk in pursuit of profit. Speculators have no interest in owning the product being traded, but they are interested in the contracts for those products. Think of it like investing—buying and selling futures contracts in order to make a profit when prices move in the right direction.

It takes two

Hedgers and speculators go hand in hand—if you took one away, there simply would be no market. Hedgers transfer risk, and speculators absorb that risk. It takes both types of traders to bring balance to the market and keep trades moving back and forth.

Futures Trading Strategy  — Inside Futures
Overpriced and over-complex futures contract trading strategies that include complex formulas and multiple lagging indexes are generally not conducive to successful futures trading.

Related Posts