3 Profit-Making Strategy in Futures Trading

In theory, price trends in futures trading can be divided into three categories: uptrend, downtrend, and sideways movement. Similarly, strategies for trading futures to make a profit can also be classified into three approaches. Let’s take a look at each pattern.

1️⃣ Breakout

This strategy is used when the price trend changes from a downtrend to an uptrend by surpassing a significant resistance level. When prices increase rapidly through the resistance level, traders can take advantage of this momentum to open a long position and make a profit. However, this strategy requires a high level of expertise because sudden price surges may attract other traders who are looking to sell and take profits, which can lead to a sharp price reversal.

2️⃣ Buy on Dip

This strategy is used to generate profits when the price of futures is in an uptrend. To minimize the risk of entering a long position at a high price, traders wait for the price to dip and reach the desired support level. They then open a position when they see the upward trend, allowing them to enter at a lower cost with reduced risk. Traders can sell and take profits when the price reaches the resistance level or hold until the uptrend ends. However, it is important to note that buying during a dip does not guarantee an immediate price rebound. Traders should also implement proper portfolio risk management or money management techniques. This approach is suitable for novice traders as it carries relatively low risk. Nevertheless, it is crucial to always set stop-loss levels to manage potential losses.

3️⃣ Channel Trade

This strategy is used when the price trend of futures is sideways or when it is unclear whether it’s an uptrend or a downtrend. Traders employing this strategy need to identify clear support and resistance levels. They can choose to open a long position when the price falls to the designated support level, or they can sell and take profits when the price reaches the predefined resistance during an uptrend. Alternatively, if the price reaches the predetermined resistance level, they can open a short position and profit from the downtrend. This strategy involves trading within the defined price range. Note that if the price remains in a very narrow sideways range, such as fluctuating less than 5%, the channel trade strategy may not be effective. It is typically more suitable for price volatility of approximately 10% to provide sufficient profit margins.

By understanding these three trading strategies, traders can realize that profits can be made in any market condition, whether it is in uptrend, downtrend, or sideways movement. The key lies in choosing the appropriate strategy that aligns with the price trend, and employing accurate analysis tools.

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