Investors can separate the market returns and excess returns of the investment portfolio by (selling) derivatives such as futures and options.
Futures are not primarily goods, but standardized tradable contracts based on certain mass products such as cotton, soybeans, oil, etc., and financial assets such as stocks, bonds, etc. Therefore, the subject matter can be a certain commodity (such as gold, crude oil, agricultural products) or a financial instrument.
Extended information:
1. Keep a calm mood
Having an impatient mind or distracting thoughts can easily lead to making wrong decisions. Successful speculators have methods to maintain a calm mind when dealing with the market, and know how to leave the market when they cannot suppress fluctuating emotions. Successful futures traders need to concentrate and observe every change in market conditions in order to make appropriate decisions and make profits in the market. The greater the market changes, the more we must stay calm and concentrate on facing them.
2. Correct psychological state
Before entering the market, you should understand that actions can bring profits or losses, because your own estimates and judgments may be wrong. . After entering the market, do not let book profits or book losses shake your confidence in the original careful deployment. Good times tend to make people feel relaxed, while bad times often make people feel depressed. Both of them drive speculators away from the correct psychological state, which is not conducive to making objective analysis when responding to the market and striving for good results.
3. Quiet working environment
Most people are easier to make calm and accurate decisions in a quiet environment, but it is difficult to conduct detailed research in a noisy environment. and analysis. Therefore, the speculative performance of most futures brokers is not ideal. For some people, adding some music to a quiet working environment can relax their nerves and avoid making mistakes under excessive stress. Respond to the market easily, and even if you make a mistake, it is easy to turn defeat into victory.
4. Strictly observe discipline
Fighting in the futures market is just like the army on the battlefield. Special attention must be paid to discipline. Each step in each go-to-market plan is part of the overall deployment strategy and should not be changed on the fly. All revisions must be planned in advance and implemented when necessary. In any case, any loss caused by violation of discipline is your own fault and can only be regarded as a profound lesson.
5. Study the speculative climate
Before the market opens every day, speculators must study the short-term climate of futures prices and evaluate the impact of changes in the external market at night on futures prices in the morning. The market trend on the daily chart can show the prevailing direction to pay attention to when exiting/entering the market. When entering the market in the right direction, be bold, hold positions step by step, and leave the market calmly. When entering the market in the opposite direction, you should be more restrained, hold positions prudently, and close as soon as you see profits. Actions against the market require higher risks, which every speculator should understand clearly.