TYPES OF TRADING
As well as the diverse types of participants in the marketplace there are also various styles of trading that you will encounter. Speculators will generally trade either ‘outrights’ or ‘spreads’. Both have their distinct advantages and disadvantages:
Outright trading is taking standalone positions in any one market, which is not correlated to another product. Outrights carry greater risk as positions are based on movement of price. This means outrights tend to be prone to greater volatility hence the margin requirements are higher. Taking an outright position is to simply buy (go long) or sell (go short). Like any trade you can go to market i.e. Hit the bid or lift the offer, alternatively orders can be placed in the order book at a price you wish to pay and as such you will need to wait until that price is reached for execution.
A spread is the simultaneous purchase and sale of the same or similar commodity in the same or different contract months. Spread trading is usually considered to be a lower risk strategy than an outright long or short futures position, and therefore margin requirements are usually much less than an outright long or short futures.