The Stock and CFD MarketsThe global financial markets have never been so vibrant and alive, and they have never been so accessible to you as an individual investor. You are in a unique position. Never before have individual investors, like you, had access to everything they needed to be successful on their own in the global financial markets. Now you do. Both the stock and contract for difference (CFD) markets are exciting markets that give individual investors, like you, access to the world's stock markets with an exciting level of leverage and flexibility. Let's take a look at the basics of how each of these markets work. We'll start with the stock market and then take a look at the CFD market.
The Stock MarketInvestors trade stocks - shares of ownership in a company - through stock exchanges. Before the rise of the Internet, stock exchanges were physical trading floors where investors, or their brokers, could get together and negotiate prices for the stocks they were looking to buy and sell. While many of these physical exchanges, like the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE) still exist, new Internet-based stock exchanges, like the NASDAQ, have developed. Regardless of whether the stock transactions take place on a live trading floor or in cyberspace, the important thing for you as an investor is that there is a place where you can buy and sell your stocks. Why would you want to buy and sell stocks instead of simply buying and holding stocks? Investors buy and sell stocks based on their belief of what the price of the stock is going to do in the future. If they believe the price of the stock is going to go higher, they buy the stock. If they believe the price of the stock is going to go lower, they sell the stock.
Why Stock Prices Go Up and DownCompanies are in business to make a profit. You don't have to get any more complicated than that. Companies want to make a profit. When companies do make a profit, managers either reinvest the money back into the business for future growth or they distribute the money to the owners of the business. As you just learned, you are buying ownership in a company when you buy stock, which means managers would be distributing money to you. These cash distributions to stock holders are called dividends. Companies that are growing and generating more and more profits tend to have stock prices that move higher and higher. Companies that are not growing and are not generating more and more profits tend to have stock prices that move lower and lower. As a stock investor, however, you cannot simply look at how well a company is performing today when you are choosing which stocks to buy and which stocks to sell. Investors are most interested in what they believe the company will do tomorrow, next month and next year. If they believe the company will continue to grow and generate profits, they will buy the stock. If, on the other hand, they believe the company will not continue to grow and generate profits as it has done in the past, they will sell the stock. Now that you have a basic understanding of the stock market, let's take a look at the CFD market.
What is a CFD?A CFD, or contract for difference, is a contract that rises or declines in value as the stock on which the contract is based rises or declines in value.
Why the Value of CFDs Goes Up and DownA CFD gains or loses value as the difference between the price of the stock when you bought the CFD and the current price of the stock fluctuates. For example, if you buy a CFD that is based on a share of Microsoft (MSFT) stock, and the share of stock rises in value, the value of your CFD will also rise. Conversely, if you buy a CFD that is based on a share of MSFT stock, and the share of stock declines in value, the value of your CFD will also decline. The value of the CFD is directly tied to the price of the stock, which is why you must understand why stocks move before you invest in CFDs.
Leverage in the CFD MarketIf the value of a CFD is directly tied to the value of the underlying stock, why not just trade the stock? Why would you want to trade CFDs instead? The answer: leverage. When you trade CFDs, you can use leverage to enhance your investing returns. When you buy a stock, you have to pay the full price of the stock. If the stock is trading at $25, you must pay $25 for the stock. If the stock is trading at $100, you must pay $100 for the stock. When you buy a CFD, on the other hand, you only have to pay a portion of the total price of the stock - sometimes as little as 5 percent. Leverage enhances your profits, but it can also enhance your losses. Imagine you buy a CFD on a stock that trades for $50, but you only have to set aside $5 for the CFD because you are taking advantage of leverage and can pay as little as 10 percent on this particular stock. Now imagine that the value of the stock increases 10 percent, from $50 to $55. How does this affect your CFD trade? Remember, a CFD is a contract for difference so you make the difference between $50 and $55 - which is $5. If you had bought the stock, you would have made a 10 percent profit ($5 / $50 = 10%). However, since you bought the CFD instead and only had to set aside $5 to enter the trade, you made a 100 percent profit ($5 / $5 = 100%). While this is a tremendous return, you have to remember that leverage can also work against you. If you had entered this same CFD trade and the stock had declined $5, from $50 to $45, instead of rising, you would have lost a larger portion of your investment as well. If you had bought the stock, you would have suffered a 10 percent loss (-$5 / $50 = -10%). Whereas, since you bought the CFD and only had to set aside $5 to enter the trade, you would have lost 100 percent of your investment (-$5 / $5 = -100%). Leverage is an incredible tool. Use it wisely.
FUTURESWant to get into or better at trading commodities? Coffee, oranges and oil will never look the same to you after following our protagonist James and learning about Futures markets and strategies with him. | Beginner | Profits are affected by your personality, be it timid, confident or greedy.
Learn how to outwit yourself!
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Trading Psychology"I wish I knew then what I know now." How many times has that thought rolled through your head? Our friend James has probably thought that about his trading career hundreds, if not thousands, of times. You see James started on the wrong foot as a Futures trader. He thought the most important thing to understand was the market. He focused all of his energy trying to learn about the market and didn't spend any time focusing on himself as a trader - and he paid the price. Futures traders have to not only compete in the Futures market but also against themselves. You have the potential to be a successful Futures trader, but you also have the potential to be your own worst enemy. We, as humans, are naturally emotional. Our egos want to be validated - we want to prove to ourselves that we know what we are doing and that we are capable of taking care of ourselves. We also have a natural instinct to survive. All of these emotions and instincts can combine to provide us with trading successes every now and then. Much of the time, however, our unchecked emotions get the best of us and lead us to trading losses unless we learn to control them. Many Futures traders believe it would be ideal if they could completely divorce themselves from their emotions. Unfortunately that is next-to-impossible and some of our emotions may actually help us to improve our trading success. The best thing that you can do for yourself is learn to understand yourself as a trader. Identify your strengths and your weakness, and pick a trading style that is right for you. Don't get too far down the road, like James did, before you spend time learning about you. In this section you will learn about the following four psychological biases that may be affecting your trading results and what you can do to overcome them: - Overconfidence bias
- Anchoring bias
- Confirmation bias
- Loss aversion bias
| Intermediate | Learn about trade sizes, prioritizing and the defining distance to stop orders.
Risk ManagementThe most important part of investing is risk management. Risk management involves determining how much of your overall portfolio you are willing to put at risk in any one trade and how many contracts your risk tolerance warrants. Proper risk management can be the difference between a successful account that you are able to manage far into the future and an unsuccessful account that you deplete or wipe out altogether within six months. If you've ever watched a poker tournament on television you will have seen money-management in action. Rarely will you see players push all of their chips into the middle of the table on a single bet. In most cases it would be foolish to do so. If poker players risk only a portion of their money in any one bet then they know that, win or lose, they will have the means to play the next hand. Yet if poker players bet everything on one hand then the only way they will be able to play the next hand is if they are right. That is a lot of pressure, and you have to be looking at some pretty good cards to justify making such a bold move. The investors who enjoy the greatest amount of success in their trading are those who have established clearly-defined rules that govern their trading. These rules help them to avoid the money management pitfalls you just learned about and keep their emotions under control. Below are three money management rules you will want to incorporate in your own trading: - Live to trade another day
- Know what you are willing to risk
- Know how to determine trade size
You will also learn about one of the Futures market's most important trading tools: a stop-loss. |
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Charting BasicsJust as James knows he has to start with the basics in his karate class, he also knows he has to start with the basics as he learns about technical analysis and how it can help him as a Futures trader. Charts are one of a Futures trader's best friends. You will probably spend more time using your price-charts as a Futures trader than you will any other trading tool. Since your charts are going to play such a large part in your trading it is imperative you become familiar with them. The more comfortable you are with your charts, the easier it will be to become a successful Futures trader. To help you become acquainted with your charts, and how you can effectively use them, we will cover the following concepts: - Chart setup
- Chart time frames
- Chart types
We will discuss the incredible technical indicators that you can add to your charts to improve your trading results in a later section. Take the time now to learn them so that you will be ready for more advanced material later. Technical Analysis: Trends, Support and ResistanceFutures are rising. Futures are falling. If you watch or read financial news reports you will have seen or read people talking about Futures moving up and down. Of course it is not the Futures themselves that are moving up and down but rather the prices of those Futures that are moving up and down. Futures prices change daily. Your job as a Futures trader is to learn to identify where the prices are going to go next. Futures traders keep track of where Futures prices have been in the past using Futures price-charts. By keeping track of where Futures prices have gone, Futures traders are able to more accurately project where Futures prices are going to go in the future. This process of analyzing past Futures prices to determine future price movement is called technical analysis. Technical analysis is considered by most traders to be somewhat of an art form that takes time and practice to master. Get started today on the path to becoming an accomplished technical analyst by learning the following foundational concepts of technical analysis: - Trends - Where prices may be going
- Support and Resistance - Where prices may stop and turn around
Trading with the Trend
Identifying the trend and trading with it is vital to your success as a Futures trader. The Futures market can be an emotionally charged place and, when traders start pushing the price of a Futures contract in one direction or another, other traders typically start to follow suit and push the price of the Futures contract in the same direction. When you see increasing momentum building behind a moving Futures contract then the chances are good that the Futures contract will continue moving in that direction. At that point you increase your odds of making money by trading with the trend. Fighting the trend generally turns out to be a losing proposition. Trends tell you where prices will most likely be going in the future. If traders are pushing the Futures contract price higher then you need to buy the Futures contract to make money. If traders are pushing the Futures contract price lower then you need to sell the Futures contract to make money. If traders are in disagreement over where the Futures contract price should go and are pushing the Futures contract price sideways then you either need to alternate between buying and selling the Futures contract or wait until the trend points up or down to make money. Trends do not move straight up or straight down. They typically move higher or lower in a stair-step fashion. Upward trends often move higher for a while and then give up part of their gains before turning back around and moving higher again. Conversely, downward trends often move lower for a while and then regain a part of their losses before turning back around and moving lower again. Trends move in this stair-step fashion because different traders have different outlooks on where they believe Futures contract prices are going to move in the future and they place their trades accordingly. These trades cause the Futures contract prices to move up and down within the same trends. When a majority of traders believes the Futures contract price is going to move in one direction they can overpower the minority of traders who disagree with them. When this happens the Futures contract price begins to trend and will usually move in one direction for a while until the majority loses momentum. As the majority loses momentum the minority can momentarily exert its influence and push the Futures contract price in the opposite direction to retrace part of the previous movement. However, once the majority catches its breath and decides to resume building momentum, it will turn the Futures contract price back around and continue in the original direction. Every time a Futures contract turns around and begins moving in the opposite direction it forms a new high or a new low. New highs form when a Futures contract moves higher and then turns around and moves lower. New lows form when a Futures contract moves lower and then turns around and moves higher. Identifying these highs and lows allows you to identify whether a Futures contract is in an upward trend ('up trend'), a downward trend ('down trend') or a sideways trend. Up trends - Futures contracts that are trending upward form a series of higher highs and higher lows (see Figure 1). 
Figure 1 - Up Trend
Down trends - Futures contracts that are trending downward form a series of lower highs and lower lows (see Figure 2). 
Figure 2 - Down Trend
Sideways ('range bound') trends - Futures contracts that are trending sideways form a series of highs that are at approximately the same price level and a series of lows that are at approximately the same price level (see Figure 3). 
Figure 3 - Sideways Trend
Trends - whether they are up trends, down trends or sideways trends - can form over various time periods. Identifying the following trends over each timeframe and being able to align them in your analysis is crucial to your success as a Futures trader: - Long-term trends
- Intermediate trends
- Short-term trends
- Aligning trend timeframes
Technical Analysis: Technical IndicatorsCharts always have a story to tell. However, sometimes those charts may be speaking a language you do not understand and you may need some help from an interpreter. Technical indicators are the interpreters of the futures market. They look at price information and translate it into simple, easy-to-read signals that can help you determine when to buy and when to sell a futures contract. Technical indicators are based on mathematical equations that produce a value that is then plotted on your chart. For example, a moving average calculates the average price of a futures contract in the past and plots a point on your chart. As your chart moves forward, the moving average plots new points based on the updated price information it has. Ultimately, the moving average gives you a smooth indication of which direction the futures contract is moving (see Figure 1). 
Figure 1 - Technical Indicator: Moving Average
Each technical indicator provides unique information. You will find you will naturally gravitate toward specific technical indicators based on your trading personality, but it is important to become familiar with all of the technical indicators at your disposal. You should also be aware of the one weakness associated with technical indicators. Because technical indicators look at historical price data, they do lag current market data to an extent, but they still provide excellent information. Technical indicators are divided into the following categories: - Trending Indicators
- Oscillating Indicators
Trending Indicators
Trending indicators, as their name suggests, identify and follow the trend of a futures contract. Futures traders make most of their money when futures are trending. It is therefore crucial for you to be able to determine when a futures contract is trending and when it is consolidating. If you can enter your trades shortly after a trend begins and exit shortly after the trend ends, you will be quite successful. Let's take a look at the following trending indicators: - Moving average
- Bollinger bands
 | Moving Average |
| Bollinger Bands |
Oscillating Indicators
Oscillating indicators, as their name suggests, are indicators that move back and forth as futures contracts rise and fall. Oscillating indicators can help you determine how strong the current trend of a futures contract is and when that trend is in danger of losing momentum and turning around. When an oscillating indicator moves too high, the futures contract is considered to be overbought (too many people have bought the futures contract and there are not enough buyers left in the market to push the futures contract higher). This indicates the futures contract is at risk of losing momentum and turning around to move lower or sideways. When an oscillating indicator moves too low, the futures contract is considered to be oversold (too many people have sold the futures contract air and there are not enough sellers left in the market to push the futures contract lower). This indicates the futures contract is at risk of losing momentum and turning around to move higher or sideways. Let's take a look at the following oscillating indicators: - Commodity channel index (CCI)
- Moving average convergence divergence (MACD)
- Slow stochastic
- Relative strength index (RSI)
| Advanced | The influence of weather and geography on the Futures markets. Learn why you might want to watch the Brazilian weather forecast Seasonality of Supply and Demand"I always keep these seasonal patterns in the back of my mind. My antennae start to purr at certain times of the year."
—Kenneth Ward Futures contract prices ebb and flow with the seasons of the year. Moving in what seems to be a predictable rhythm, prices seem to always go up at certain times of the year and down at other times of the year. Whether it is spring planting season for agricultural commodities, a summer vacation for equities or Christmas demand for precious metals, there always seems to be something on the calendar that influences supply and demand in the marketplace. This ebb and flow of prices is certainly not perfect—remember, many factors other than seasonality affect the price of a Futures contract too - but knowing how the Futures contracts you are watching progress through the calendar can help you plan your trading year and prepare for future trades. To help give you a broad overview of your investment calendar and which Futures contracts you may want to be buying and selling at any given time, we will discuss the characteristics of the four seasons of the year: Before we jump into the seasons, however, it is important to know who the major suppliers of each commodity are so you can better understand why the changing seasons affect each one.
Commodity Suppliers
In today's global economy, the commodities we consume can come from virtually anywhere around the globe. Often we hear about economic powerhouses like the United States, the European Union and China and we start to think that everything we buy comes from these places. When you're dealing with raw commodities, however, that is not the case. Countries like Brazil, Argentina, India and even Vietnam are dominant producers of many of the commodities that trade on the global Futures markets. Let’s take a look at the top three producers for each of the following commodities:  | Energy |
| Precious metals |
| Agriculture |
As you think about these commodity producers - especially those that produce agricultural commodities - it is important to remember which hemisphere they are in because that will affect crop cycles. When it is summer in the Northern Hemisphere, it is winter in the Southern Hemisphere, and vice versa. Now that you know who the major producers of each commodity are, let's take a look at what you should be watching for in each season of the year. Technical Analysis: Price PatternsTraders vote with their cheque-books. If they believe a Futures contract is going to move higher then they will buy the Futures contract. If they believe a Futures contract is going to move lower then they will sell the Futures contract. When their money is on the line they will do whatever it takes to be profitable. Often the actions of these self-interested traders form price patterns on the chart. Price patterns are chart formations that provide insights into what Futures traders are thinking and feeling at various price levels. Learning to recognize various price patterns therefore gives you an advantage over traders who are only using fundamentals or technical indicators. Imagine having the ability to identify trade entry points as a Futures contract breaks out and the ability to accurately project how far a Futures contract is going to move once it has broken out and starting moving. Price patterns give you this ability. Price patterns are divided into the following two categories: - Continuation patterns
- Reversal patterns
Continuation Patterns
Futures traders continually ask themselves the question "Can this trend continue?" Deciding whether to enter a new trade in the middle of a trend or whether to exit the trade you are currently in and take your profits is difficult. You can never know if a Futures contract is going to turn around and start moving in the opposite direction. Or can you know? Continuation patterns give you advanced warning when a Futures contract is likely to resume its trend after a short consolidation period and they also indicate how far the Futures contract is likely to move in that direction. Of course continuation patterns are not infallible - but they do put the odds of success in your favor. Take some time to become acquainted with the following price continuation patterns: | Pennants |
| Flags |
| Wedges |
| Triangles |
Reversal Patterns
Futures traders continually ask themselves the question "Can this trend continue?" Deciding whether a trend is over and if it is time to trade against the previous trend is difficult. You can never know if a Futures contract is going to turn around and start moving in the opposite direction. Or can you know? Reversal patterns give you advanced warning when a Futures contract is likely to turn around and begin a new trend, and also indicates how far the Futures contract is likely to move in the opposite direction. Of course reversal patterns are not infallible but they do put the odds of success in your favor. Take some time to become acquainted with the following price reversal patterns: Technical Analysis: FibonacciFibonacci analysis is the study of identifying potential support and resistance levels in the future based on past price trends and reversals. Fibonacci analysis is based on the mathematical discoveries of Leonardo Pisano - also known as Fibonacci. He is credited with discovering a sequence of numbers that now bears his name: the Fibonacci sequence. The Fibonacci sequence is a series of numbers that progresses as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 … To arrive at each subsequent number in the sequence, you simply find the sum of the two preceding numbers in the sequence. For example, to find the number that follows 55 in the sequence, you find the sum of 55 + 34 (the two preceding numbers in the sequence). The sum of 55 + 34 is 89. This is the next number in the sequence. What intrigued Fibonacci about this sequence was not the numbers themselves but rather the relationships among the numbers, or the ratios created by various numbers in the sequence. Similar relationships are known to exist throughout nature, in botany and even psychology, and very notably in astronomy because the Fibonacci sequence has a high correlation with the respective distances between the planets in our solar system and the sun around which they turn. Although the ratios between adjacent numbers vary throughout the sequence, in respect of the numbers 21, 34, 55 and 89 the ratio is very similar and is around 1.618, which traders often refer to as 'the golden ratio'. They therefore make use of just those four numbers in the Fibonacci sequence, 21, 34, 55 and 89, in a predictive manner.
The golden ratio and the other ratios that exist within the Fibonacci sequence represent the natural ebb and flow of life. They also apply to the natural ebb and flow of futures contracts. In this section, you will learn how Fibonacci ratios can be applied to Futures contracts using the following analysis tools: - Fibonacci retracements
- Fibonacci projections
- Fibonacci fans
News AnalysisFundamentals move Futures contracts - and news moves fundamentals. News of an interest-rate hike or news of a sub-prime meltdown can cause a Futures contract to change direction in an instant. The fundamentals that were true just 10 seconds earlier can become completely meaningless in the face of new fundamental information. You, as a Futures trader, need to be able to react to big news when it is released. You may be worried that you will lag behind your computer in reacting to all of the market news that may come out during a day. After all, the Futures market is virtually a 24-hour marketplace. Luckily, as a retail Futures trader, you don't need to monitor the news-wires quite this actively. If you use appropriate risk-management techniques you have the ability to react more nimbly than large institutional investors whilst protecting yourself from extreme downside risk. In this section you will learn about the following characteristics of news in the Futures market and how you can profitably utilize them: - Most economic news is scheduled
- The expected is already priced in
| Most economic news is scheduled |
The Expected is Already Priced In
Investment analysts, economists and other market participants are constantly analyzing forthcoming economic announcements, trying to determine ahead of time what the news is going to be. Whilst no two analysts will arrive at exactly the same conclusion, if you look across the various estimates you can determine what the average estimate is. This average estimate is also known as the 'consensus estimate'. Knowing what this consensus estimate is will help you to take advantage of price movements once the economic announcement is released because the consensus estimate will already be 'priced in' to the value of most Futures contracts. Here's how it works. Once investors complete their analysis they start placing their trades to take advantage of where they believe Futures contracts are going to move in the future. They don't wait until the announcement comes out. They want to be ahead of the market. So, by the time an economic announcement is released, most of the major market participants have already placed their trades. If an economic announcement is released, and the number matches the consensus estimate, Futures contracts will most likely not move very much because of the news. Since most of the big traders have already placed their trades there are no new traders to jump in and move prices. If, however, the actual number from the economic announcement is higher or lower than the consensus estimate, then the price of many Futures contracts will have to adjust either up or down to factor in the new economic information. During this period, when market participants are scrambling to factor in the new information, you have an excellent opportunity to take advantage of the price movement. You can do so in one of the following three ways:- You can enter your trade immediately following the economic news announcement
- You can wait for the market to process the new information and enter your trade once a new trend has been established
- You can set two entry orders, one above the current price of the Futures contract and one below the current price of the Futures contract, just before the economic announcement is released
| Expert | Trend charts, signal charts and why they're more fun than they may sound. Time your trades and increase your chances for profit. Trading Using Multiple TimeframesFutures markets around the globe are able to function properly because, at any given time, some traders want to buy Futures contracts whilst other traders want to sell them. A trader's desire to buy or sell is dependant on their strategy, their objective and their chart time-frame. Short-term traders and long-term traders are going to see dramatically different things on their charts because they are watching quite different charts. Short-term traders are probably looking at 1-minute to 15-minute charts, whilst long-term traders are probably looking at daily, weekly or monthly charts. Trends, support and resistance lines, and technical indicators look much different on a 1-minute chart to the way they look on a daily chart. For example you may look at a 1-minute chart of Gold (ZG) and see that the price appears to be in a down-trend. Yet if you switch your chart to a daily chart you may see that the price has been in an up trend for years. So which chart is right? Is Gold in an up trend or is it in a down trend? The answer is that both charts are right. It all depends on your perspective and your trading timeframe. If you are a shorter-term trader, you should be focusing on shorter-term charts and trends. If you are a longer-term trader, you should be focusing on longer-term charts and trends. However if you can get both the shorter-term trends and the longer-term trends to line up, you stack the odds of success in your favour. To get a comprehensive idea of what trending and support and resistance forces are affecting the Futures contracts that you are watching, you should be analyzing the following three charts (timeframes) in your technical analysis: - Trend chart (Longer-term chart)
- Signal chart (Chart you typically use)
- Timing chart (Shorter-term chart)
Once you have analyzed each timeframe, you can put them all together to confirm a high-probability trading setup.
Intermarket AnalysisThe Futures market is the most diverse global financial market. Whilst no other financial market can compare to the diversity of the Futures market, other financial markets do impact on the Futures market. For instance the U.S. Bond market can affect the value of the U.S. Dollar Index Futures contract just as the Japanese yen can affect the value of the Nikkei 225 Index Futures contract. To become a successful Futures trader you will need to recognise the relationships that exist among the world's financial markets and comprehend how these relationships may affect the Futures contracts you are trading. Sometimes you can receive advanced warning of what is going to happen in the Futures market by watching what is currently happening in other financial markets. For example if you see the value of the AUD/USD currency pair rising quickly, you can look for a corresponding rise in the value of the Gold Futures contract. Once you know what to look for, you can take advantage of the same correlations that the large institutional investors are watching. In this section we will be focusing on how the following markets affect the Futures market: - Forex market
- Bond market
- Stock market
Spread StrategiesFutures traders are not limited to simply buying and selling one Futures contract at a time to take advantage of price movements in the Futures market. They have the ability to buy and sell offsetting contracts in what is known as a 'spread' trade. Spreads take on various forms but they all have two things in common: - they provide a hedge against adverse price movement and
- they are designed to take advantage of the changes in price relationships between two Futures contracts.
Spreads provide a hedge against adverse price movement because you simultaneously buy and sell Futures contracts when you enter a hedge. As the value of one contract goes up the value of the other contract goes down. For instance if you incur losses on the Futures contract you bought as part of the spread, you can partially offset them with the gains you will realize on the contract you sold as part of the spread. Conversely if you incur losses on the Futures contract you sold as part of the spread, you can partially offset them with the gains you will realize on the contract you bought as part of the spread. Spreads take advantage of changes in price relationships. Imagine, for instance, that you see crude oil Futures contracts trading on one exchange for $110 per barrel and crude oil Futures trading on another exchange for $111 per barrel. You could enter a spread trade by buying the crude oil Futures contract that was trading at $110 per barrel and selling the crude oil Futures contract that was trading at $111 per barrel. If the two prices eventually converge, you will make a profit. In this section we will be focusing on the following three types of spread trades: - Inter-delivery spreads
- Inter-commodity spreads
- Inter-exchange spreads
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