There are a few key strategies that traders in Australia should keep in mind when trading futures. One of the most important is to be aware of the potential for price volatility and to use stop losses to protect against significant losses. In addition, it is essential to be aware of the market trends and trade with the trend where possible.
Traders should always use limit orders to get the best prices and protect their profits. By following these simple strategies, traders can improve their chances of success in the futures markets.
Price Volatility
The futures markets are highly volatile, and traders should keep stop losses in mind when considering their trades. Should the price of the futures contract move against them for any reason, they will lose money. As a result, it is imperative to make sure that you always know how much you stand to lose on each trade so that you can set your stop loss at the right level. This is especially important when trading futures in Australia because of the potential for price volatility.
Trends
The Australian market has two types of trends that traders should be aware of, short term trends and long term trends. Short term trends tend to last only a few days or weeks, while long term trends can last for months or even years. Traders should trade with the trend where possible to maximize their profits. However, it is essential to note that not all trades will be profitable, and traders should always use limit orders to protect their profits.
Limit Orders
One of the most important things for traders to know about trading futures in Australia is that they should always use limit orders when placing trades. This way, they can choose the best price and protect their profits. If they do not use this strategy, they will inevitably end up selling at a much lower price than possible or buying at a much higher price.
Leveraged Products
Some futures contracts are extremely risky because they are highly leveraged, meaning traders can buy or sell huge amounts of the product for a relatively small investment. For example, traders can potentially buy or sell 100 times more wheat than they have purchased if they use the appropriate leverage. As a result, traders need to be very careful when trading highly leveraged products and should only do so if they fully understand the risks involved.
Margin Trading
Another thing that traders should be aware of when trading futures in Australia is margin trading. Margin trading allows traders to borrow money from their brokers to buy more contracts than they could typically afford. This can be a dangerous proposition for beginner traders and can lead to significant losses if the trade goes against them. As a result, traders should only margin trade if they are confident in their ability to predict the markets correctly.
Hedging
Hedging is another strategy that traders can use when trading futures in Australia. Hedging requires you to take a position in the market that offsets an existing position. For example, if a trader has a long position in wheat, they could take a short position in corn to offset any potential losses. This can be an effective way of reducing the risk of loss on an existing position.
Trading Overseas Markets
Traders can also consider trading overseas markets to diversify their portfolios and reduce their reliance on Australian futures contracts. However, traders must remember that they will need to deal with different brokers if they plan on trading international markets and that there may be higher costs associated with this type of trading.
In Conclusion
Trading futures can be a profitable way to invest, but it is essential to understand the risks involved. Australian traders should always consult with a professional broker or financial advisor before entering into any futures contract. By doing so, traders can ensure that they use the best strategies for their individual trading style and goals. With some research and caution, traders in Australia can enjoy successful trading with futures contracts.
