Futures Trading Strategies Professional Day Traders Use.

1. Futures Trading Strategies Professional Day Traders Use.

2. This article will go over the main strategies day traders use that I’ve been exposed to. Each strategy or style has pros and cons. What I’ll leave out are strategies you couldn’t do from home. For example, I know of one firm that ran an open outcry FX desk for USD/THB – and FX market-making firm that on a busy day could push through a billion dollars – but, unless you know of a dozen banks to have on the line all day – I’d say that’s not something you can do from home. Here are a few futures trading platform and strategies that day traders use! The “In Play” Game “In Play” is where I started with Order Flow. And it was a long time ago, too - but the technique is still valid in futures trading strategies. The game works like this each day. Some of the 15,000+ stocks on the US Markets would be “In Play” - because of one or more of the following:

3. Quarterly earnings announcements during “earnings seasons” - some of these occur in the evening and some in the morning. But not during regular market hours. Throughout the quarter, companies typically estimate earnings, and then they will either beat/miss or be in line with these estimates. Upgrades/Downgrades. Like Goldman Sachs says, the prospects for specific equity are better, often with a price target. Company-specific news. For example, a product recall, a new government contract - anything that would impact revenues. Marco news. Like interest rate increases would impact companies with a high debt load. Steel price increases might impact construction companies. ● ● ● ● So each day, you do some research and compile a list of stocks you think will be in play. You aren’t using the same tools that professionals use, but sites like Briefing.com certainly give you an excellent place to start each morning.

4. Spread Trading Spread trading is one of the best futures trading strategies because it covers many different types of trading. It’s not my area of expertise, but it is widespread and can be done in many markets. I will keep it simple, so spreaders - don’t tell me I missed a gamma here, a yield curve there or a butterfly wherever. Spreading is about related instruments. An easy one to understand is Crude calendar spreads. Crude oil futures expire each month, so there’s a contract each month. When you buy a crude oil contract, you commit to buying essential oil at expiry. Storage and cost of borrowing. Recently crude oil futures went to -$30 in price - simply because there was no more storage. So there’s a spread that’s quite understandable. airs trading in equities takes two correlated stocks - for example, two bagel stores. If one goes up, then so should the other UNLESS (for example) one is being purchased by Amazon - in which case the correlation won’t hold.

6. Pros Spread trading is a non-directional trading strategy - it doesn’t matter if markets are going up or down only if they go out of line. It is perceived as less risky as it’s all about to mean reversion trading. ● ● Cons There is a higher fee (you have more than one trade on). There are prop firms out there that can break even or profit from your trading, even if you lose. Be wary. You don’t want to be in a firm where 95% are struggling but are doing great on fees. ● This is a more intellectual, slightly nerdy way to trade. It’s also suitable for the risk-averse. If you have good math skills, you may find spread opportunities nobody else noticed.

7. Macro/Futures Day Trading In a way - day trading futures isn’t that different from the first equities strategy we outlined. Just that you don’t have well over 15,000 instruments to see which is in play. Most people go to S&P500 Futures, but we find it better to find a market with a pace that suits you and grow from there. Looking left on the chart isn’t a terrible thing - if we are in a place we’ve been stuck for ages, then expect to be stuck for a bit more and more fluid movement when we finally escape. The last 2 are great examples of “binary” news gifts that keep on giving - it’s better, it’s worse, no, it’s better again, oops, it’s worse - over and over again with every flip and flop giving you a fairly predictable outcome. So in order of magnitude, you get: News driven moves Speculation driven moves Mush ● ● ●

8. Mush being the days where there’s not much on. Fortunately, the financial media does its best to drum up interest/pump up stories to give us good action. News driven markets give you a better confidence that a move may or may not be sustained. Speculation driven moves - like ranges or short term trends with uniform pullbacks on a market you watch every day give you more minor, more technical moves to exploit. This is the heart of what we do at Jigsaw, but of course, it has its pros and cons. Pros The market becomes like a friend (sometimes the inappropriate but tolerated friend that gets a bit too touchy when drunk) - and you get a great feel for the moves. Macro news is a lot easier to digest - you don’t need to be an accountant to see this stuff. You are becoming master of a specific volatility profile - which you can seek elsewhere - most markets have brothers/sisters with similar characteristics. ● ● ●

9. Cons Too many people gravitate towards the busiest, most complex market (S&P500) when other markets might be better for them. Many Markets do have dead periods, for example, at Christmas and Summer Time - but then you should be taking a break too. ● ● When I found that one of my competitors on the “In Play” game had four full-time researchers - I moved to macro day trading futures, where I feel the playing ground is more level. This concludes the best futures trading strategies.