Futures traders come in all flavors but it’s basically a Neapolitan world. You can be a scalper, swing trader or a combination trader. Mindset and methodology generally determine in which sector of the futures trading world you’ll thrive.
Scalpers. Scalpers seek immediate gratification. They look for short-term market movements seeking to shave money off the bid/ask price spread. Holding each position for only a very short period of time (often only minutes) to minimize risk, scalpers make small gains through rapid trading.
- Money-making strategy: To realize a large gain by the end of the day from the accumulation of many small gains.
- Most productive market environment: Wide-channel, heavy-volume, trending or oscillating markets.
- In their trading tool box: 1- and 3-minute moving averages and stochastics charts.
Swing traders. Swing traders are more dispassionate. Fundamentalists at heart, swing traders track price trends and patterns and other quantitative data looking for short-term price momentum. They act quickly to exploit such short-term price movements, looking for gains that can be made in one to four days. Swing traders sometimes mitigate risk by trading in smaller quantities.
- Money-making strategy: To gain from short-term changes in price movements that occur over one to four days.
- Most productive market environment: Tight-channel, light-volume and trending markets.
- In their trading tool box: 13- and 60-minute moving averages and stochastics charts.
Combination traders. Quick reflexes and flexibility characterize combination traders. They are able to gauge the market and respond quickly to the existing environment.
To become a successful futures trader, you have to figure out which trading style suits your personality and talents. If you’re quick on your feet, have the ability to look at the indicators and make snap decisions, and can be satisfied with small wins, you could thrive as a scalper. If you prefer a more measured approach to trading, like to back your decisions up with data, and have the patience to wait for the right moment, swing trading could be your milieu. If you can live in both worlds, you’re a combination trader. Each trading style has its advantages and can be quite profitable. The trick is to figure out in which environment YOU can be most profitable.
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