Futures trading for pro traders: advanced strategies and techniques

Futures trading has become an increasingly popular form of market speculation in Australia, and more experienced traders are turning to advanced strategies to strive to maximise their returns. These strategies allow engaging with the markets more deeply while mitigating risks and capitalising on short-term trends. 

This article will discuss essential futures trading techniques for pro traders in Australia, including buy and sell signals, scalping, automated systems, spread betting, arbitrage, and technical analysis. Each strategy has a detailed header explaining its work and helpful tips for successful implementation.

Buy and sell signals

The most basic type of futures trading strategy involves buying or selling based on signals. Buy signals occur when a particular trend or indicator suggests an imminent rise in the price of a commodity, currency pair, or other asset. Sell signals are generated when the opposite occurs, and a downward trend is predicted. Pro traders typically use complex algorithms to determine their buy and sell signals – these can be based on various technical indicators such as moving averages (MA), Relative Strength Indexes (RSI), Bollinger Bands, and more.

When using buy and sell signals, it is crucial to consider the risk associated with each trade. Significant losses may occur if the signal is wrong or not interpreted correctly. It is, therefore, advisable for pro traders to diversify their portfolios by including different types of assets across multiple markets. It will help to reduce overall risk and make it easier to capitalise on profitable opportunities.

Scalping

Scalping involves quickly buying and selling the same asset multiple times in a short period, typically for small profits. For this strategy, pro traders often use low-cost assets such as currencies or commodities with high liquidity and volatility. As scalping is a relatively fast-paced activity, it requires quick reflexes and good decision-making skills to identify the right moments to enter and exit the futures market.

To generate consistent profits through scalping, pro traders should understand how market conditions are likely to affect specific instruments. They should also be prepared to analyse information quickly and accurately and take swift action when a favourable opportunity arises. It is essential to use risk management techniques such as stop-loss orders to protect profits and cut losses short.

Automated systems

Automated systems are a great option for pro traders who wish to automate their trading activity. Automation allows for faster execution of trades without manual intervention, making it possible to take advantage of opportunities across multiple markets simultaneously. Automated systems can be designed using various programming languages, such as Python or R, and they often employ backtesting methods to improve accuracy and profitability over time.

For an automated system to be successful, pro traders must ensure that the algorithms employed are reliable and effective. They should also understand the implications of their trading strategies, such as their impact on market volatility and liquidity. Correctly configuring the system’s parameters is essential to ensure that it can identify profitable opportunities while avoiding risks.

Spread betting

Spread betting involves placing a bet on which direction an asset’s price will move in a given time frame. Pro traders use this strategy when they believe that certain market conditions will result in either a rise or fall in prices for specific instruments. It does not necessarily require ownership of the underlying asset; traders can buy or sell spread bets based on predictions about future performance.

Pro traders should know the risks involved when engaging with spread betting. It is essential to understand that the market can move upwards and downwards, and losses may occur if predictions do not come true. Choosing the proper spread betting provider is essential to ensure the reliable execution of trades and competitive spreads and commissions.

Arbitrage

Arbitrage trading involves taking advantage of price discrepancies in different markets or across various assets. Pro traders often use this strategy when two similar but imperfectly correlated instruments are available at different prices. Simultaneously buying from one market and selling in another can swiftly generate profits without exposure to significant risks.

This strategy requires considerable knowledge of pricing dynamics and market conditions across multiple markets and a good understanding of the traded instruments. Pro traders should also know of commissions or fees incurred when executing arbitrage trades.

Technical analysis

The technical analysis approach involves analysing past and current price data to predict future performance. Pro traders typically use charts, indicators, and other graphical representations of market data to anticipate possible trends and opportunities for trading. This strategy requires some degree of familiarity with financial markets and an ability to interpret complex information quickly and accurately.

When using technical analysis, pro traders must understand how different indicators can signal potential entry and exit points in the market. Knowing when to ignore false signals from indicators such as Moving Averages (MA) or Relative Strength Indexes (RSI) is essential. When employing technical analysis, it is also important to consider the impact of news and external factors on price movements.