When dealing with futures, three broad types of traders can be identified: hedgers, arbitrageurs, and speculators. A speculator has a view on the future movements of a market and can use futures contracts to bet on his outlook. Consider, for example, a speculator who believes that a certain asset price is likely to increase.
One possibility of betting on this price movement is to take a long position in a futures contract on this asset. The difference from a purchase in the spot market is that the futures market allows the speculator to obtain leverage.
Speculators can be divided into three groups according to the term of holding a position: scalpers, day traders, and position traders. Scalpers are watching for very short-term trends, usually a few minutes, and attempt to realize profits from small changes in the contract price.
Day traders hold a contract for less than one trading day and do not take the risk of potential bad news overnight. Position traders hold their contracts for a much longer period and look forward to significant profits from major movements in the market.
One possibility of betting on this price movement is to take a long position in a futures contract on this asset. The difference from a purchase in the spot market is that the futures market allows the speculator to obtain leverage.
Speculators can be divided into three groups according to the term of holding a position: scalpers, day traders, and position traders. Scalpers are watching for very short-term trends, usually a few minutes, and attempt to realize profits from small changes in the contract price.
Day traders hold a contract for less than one trading day and do not take the risk of potential bad news overnight. Position traders hold their contracts for a much longer period and look forward to significant profits from major movements in the market.
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