For
speculators
who buy and sell futures strictly for profit, predicting accurately where the market is going is one of the most important factors in their success. Unless a trader can see the future or makes extraordinarily lucky guesses, there are generally two methods used to anticipate futures prices (and the prices of other investments).
Fundamental analysis
looks at what's happening in the market — supply, demand,
and the factors that affect each of these. By contrast,
technical analysis
ignores supply and demand, looking instead at the futures market itself, including price behavior, trading volume, and open interest.
Choosing your style
While some traders adhere strictly to one type of price forecasting, most use some combination of the two styles of analysis. Although analytics are essential, that approach alone is not enough to guarantee success. As with other markets, the personality and financial means of the futures trader are important factors: first, a substantial appetite for risk and second, substantial capital to put at risk.
