Now that you have seriously decided to begin trading futures for a living, the primary concern you should have is to learn about the market, and there is quite a lot to learn. Many professionals will agree that once you have the knowledge about the market, trading becomes pretty simple. Experience has proven that actually getting the right knowledge takes all the time and hard work. The intention of this article is to guide you in the right direction to cut that time considerably, so you too can be in the winners circle.
What Makes The Matket Move?
The key element which is significant in the movement of the market or any commodity is supply and demand. It is important to realize that the price of any commodity is not controlled, but in-fact is determined by value, and value is a function of supply and demand, commercial interests and the amount of buyers or sellers.
The commercial buyers are the largest players in the futures trading industry. They are known to buy in huge mega volumes, and when they buy they are usually buying the nearby months, as opposed to the distant months.
The position or intended position of the commercials can easily be followed with the help of the "Commitment of Traders". This is a monthly report of all commodities which are traded on the Chicago Mercantile Exchange (CME), and this information is vital to anyone trading futures for a living.
Once you have obtained a copy of this monthly report, you can easily determine the "Open Interest" of the commercials. The open interest indicates whether the commercials are adding to their short sale (selling) because they are expecting lower prices, or whether they are decreasing their short sale, because they are expecting higher prices.
Because the commercials must buy the nearby months, as you keep tract of the months of the commodity which they are buying, you can easily determine their desire to either own or sell any commodity in question. Consequently, you can be in a better position to enter the market either in a long position or a short position. This information will easily be very valuable to be successful in trading futures for a living.
Fundamentals Vs Technicals!
The average veteran trader usually fall into either one or the other category of trading. Very rare will you find a trader using both type of information constantly in trading futures for a living.
Generally, fundamental trading is based mainly on supply and demand, weather conditions, the movement of the commercial traders, open interest, accumalation and distribution. and also the value of premiums months, including market sentiments. But quite frankly it is very difficult to list all the fundamental factors which will determine the direction of the price of the commodity, especially today. But certainly all of the above has always proved to be serious factors in affecting the direction of commodity prices.
Technical trading on the other hand is all about forcasting prices through analysis of price movement or pattern in terms of technical data or technical analysis.
You will easily find that the average technical trader is very sceptical about the fundamental trader techniques and vise versa.
However, experienced has shown that the most successful veteran trader is one who has the wisdom to apply both trading techniques before entering or exiting a trade.
In the long run, history have shown that fundamental supply and demand factors will always affect the direction of prices, and even technical traders will agree that fundamentals are reflected in the direction of prices, even though they usually may not care what the fundamentals might be.
In today's economy, the masses have finally realized that the only job security we really have is in our own ability to perform. The home base business industry constantly keeps growing, but history keeps indicating that in order to become successful, in the shortest period of time one must obtain professional guidance, in futures trading.
Where as the above information has opened your insight about trading futures for a living, to ensure long-term success, every newbie futures trader should align themselves with a professional coach who has several years of proven success.
Source: Articlealley
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