In many ways, there are only two possible future trading strategies. An investor can ride along with the pack as it flows in a specific direction, or he can swim
upstream against the torrent of the common wisdom of the moment. Naturally, these two strategies depend a lot on the quality of information available to the trader.
Using future trading strategies to bet against a developing trend requires that you know something that others may not yet realize. It can also involve investing on a visceral level, as in playing a hunch, or going with one’s gut feeling despite the apparent pattern. In any of these cases, however, the idea is to recognize a turn in the market before anyone else does. Gigantic profits can be made by contrarian moves in the face of mass psychology movements. This is not to say that losses cannot also be incurred. After all, the masses may simply be jumping on board a moving train, which still has a ways to go until it reaches its destination.
It is important to realize that much of the moves on the futures market are triggered by macroeconomic data. News of a freeze in Brazil can immediately affect the coffee futures, while simultaneous news of a bumper crop in Colombia could go unnoticed at the same time. One needs real-time access to both the splashy news of disaster, as well as the plodding press releases of simple production figures. This wide-angle view of price sensitive information needs to be firmly married to narrowly focused technical analysis in order to achieve maximum contrarian profitability.
The same news can have either a great effect or almost none at all, depending on where the futures market stands at any given point in time. News of a civil insurrection might be shrugged off in a bull market, but it could trigger a precipitate panic at times when the market is touching on overbought or oversold conditions. Future trading strategies usually require that you choose your indicators wisely, and always back up your pure hunches with short plays as insurance.
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