What Are the Different Approaches to Trade in Futures Market?

Futures market is a kind of impulsive and flexible market, which looks highly rewarding but every step and investment should be made based on complete information, analysis and thorough strategic implementation.

Keep Informed - Avoid the risks

Like any other market, it is important that you take note of all the attached risks in a futures market, and so you should have a firm understanding and knowledge about how the whole market functions& behaves. You need to evaluate how much of your attention and time you are going to dedicate in futures market, to categorically determine your investment and strategies. Undergoing a trader training course could help an individual develop his/her knowledge about the market and how one should implement strategies and do research and analysis for proactive trading decisions.

Another important thing to note is that you should invest only that capital in Futures Market, which is earmarked as pure ‘Risk Capital’. This is specifically important for day trading beginners.

How to trade in Futures Market?

When you have decided to enter the futures market, the next contemplation is about how you are going to approach. There are different means to trade in futures market, and you should be well aware of all, to decide how you are going to take the plunge:

1. Trade by Yourself

The most common, practiced and advised method. If you have enough knowledge about the market and are looking to take risks and score big over the time, you should start trading by yourself. Traders who want to learn the tricks of the trade and grow by themselves, they should seek to start trading in the futures market by them. The investor trades his account without any assistance, and manages funds, do research, prepare analysis, maintain margins, and order trades all by him. This can be a bit risky, but for all the risk takers, who are confident and looking to accumulate profit over time, self-trading is the best route.

2. Invest through a commodity pool

Commodity pool is a type of commodity investment, wherein investors invest in a group of commodities. Commodity pool functions like a mutual fund, where no investor has a dedicated account and funds from all the investors are combined together to trade as one. This type of trading usually carries lesser risk, as profits and losses are directly proportional to the invested fund. A commodity pool also enables the capital investment in a diverse range of commodities. The main player in such investing is the broker, on whom depends the outcome of the profit or loss.

3. Invest through a managed account

If you are not open to a commodity pool, and do not think that you can trade by yourself; then the viable option available to you to invest in futures market is by opening a managed account. This means that your account will be managed by a broker, who will take all the trading decisions on your behalf, depending on the mutual agreement between you both. As you are the one pouring in all the capital, any loss incurred will be on you, as well as for margin cells. Also, you will have to shell out certain management fee to your broker; so a managed account trading suits those who have large capital to invest.

Based on all the approaches to trade in the futures market, the most viable & preferable option for day trading for beginners is to do-it-yourself, as it helps them gain knowledge and insight into the market. Initially they may have to face risks and losses, but with time and experience day traders will get acclimatize to the demands and strategic investments of the market, which will pave way for long term benefits.