In a volatile and risky market, traders not only seek profits but also want to protect themselves from unexpected fluctuations. At this point, futures contracts become an important tool to help them achieve their goals. So, what are futures contracts and what are their benefits? Let's explore in the article below.
In reality, futures contracts can be traded solely for profit purposes. Many participants in futures trading do not intend to execute the trade until the contract truly expires. Instead, they seek opportunities to buy or sell futures contracts with the aim of generating profit from price fluctuations during the trading process.
5. Some investment strategies for futures contracts
Futures contracts are often invested in according to strategies such as:
Trend Following: This strategy focuses on identifying and participating in price trends. Investors will buy futures contracts when prices are rising and sell when prices are falling. This requires the use of tools and technical indicators to determine suitable entry and exit points.
Fundamental Trading: This strategy centers on analyzing the fundamental factors of the underlying asset such as economic news, significant events, and company information. Investors will look for trading opportunities based on thorough analysis of these fundamental factors and their impact on futures contract prices.
Portfolio Diversification: This strategy aims to enhance portfolio diversification by trading across different futures contracts. Investors will allocate investment capital into various assets to minimize risk and capitalize on profit opportunities from different income sources.
It is important to note that each strategy has its own advantages and limitations. The most crucial aspect is understanding the strategy being applied, managing risk carefully, and always mastering the fundamental principles of futures contract trading.
Hopefully, the above article by Anfin has provided you with useful information about futures contracts.
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