As a futures trader you have no control, whatsoever, over the price movements of the contract you are trading. Once you have made the decision to enter the market, the price will move as it wants.
There are, however, many factors that traders have full control over, before making the decision to enter any market. These include:
- The amount of rest you have had before trading.
- The amount of exercise you get.
- Your diet.
- What contracts you trade in.
- When you buy.
- When you sell; both for profits and losses.
- The functionality of any systems you employ.
- When you shut-down systems that turn against you.
- How you feel when you are right.
- How you feel when you are wrong.
- The amount of research you perform.
- How you adapt to continually changing market environments.
Success as a futures trader may depend upon successful integration of these factors, each of which is within a trader’s control. The factors below are our opinions at Optimus Futures, and they may or may not help you realize gains. Futures Trading Basics below is just our attempt to hopefully lead you to better trading.
Your Overall Well-Being
Some traders might not take this advice seriously. However, taking good care of oneself, eating a healthy diet, exercising regularly and keeping a balanced lifestyle, is essential for longevity as a futures trader. Healthy, well-rested traders are in our opinion are at a better position to make better decisions when called upon to do so.
Futures Contracts You Trade In
Whether you are a system trader or a discretionary trader, you and you alone, choose what markets you are going to trade in. Make sure your system or method works. Be able to monitor your system and anticipate when it is about to take trades. Ensure your tape is up-to-date. Don’t let your system take trades when experiencing a lagging or delayed tape. Once your system has taken a trade, be in a position to monitor its progress. Be sure that any provisional sell signals are followed-through upon.
Only trade in contracts for which you have an empirical, data-backed trading plan in place to justify such an endeavor. New systems should be tested thoroughly, with as much data as possible, before being implemented. Fine tune and tweak your systems and continuously monitor results in order to improve performance. No amount of “demo time” would compare to practical and real experience you gain.
The Amount You Risk When You Trade Futures
The amount of money a trader wishes to risk on any trade is something that they must decide upon for themselves. It should be a definite amount or formula and it should be adhered to after a trade has been entered. Further, it is often called-for to shut down positions that look like they may hit a stop-loss before they get there.
StopLoss Disclaimer: The placement of contingent orders by you or broker, or trading advisor, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.
Some people use static risk reward ratios, such as 1:2, 1:3, 1:4 and so forth. Others prefer to exit trades based on signals gleaned from the market itself, or from fundamental indicators. What is most important, and is a trait of all successful traders, is having a plan to exit profitable trades before being put in the position to have to do so. It is important to have profit targets or events worked-out, beforehand, before putting them to work in a live environment, even for experienced traders.
The high degree of leverage that is often obtainable in commodity interest trading can work against you as well as for you.
Indicators You Follow When Trading Futures
Every trader has specialities. It’s what gives them an edge in a competitive and ever-changing environment. Whatever indicators you or your system uses, make sure you fully understand them and that you have thoroughly tested them with as much data as possible. Often, a system that is based on a particular indicator will experience periods of increased profitability as well was a periods of decreased profitability (loss). Successful traders must ensure they have methods in place to manage systems for which the profitability expected is not being achieved. Indeed, in our opinion one of the greatest skills of successful traders is the ability to quickly close any position or shut down any system as soon as there is any question as to its viability (real versus theoretical drawdown).
How Gains and Losses Affect You
It is easy to allow both positive and negative emotions take control when trading futures. Because of the amount of leverage available, it is possible to earn, and to lose, great sums of money quickly. For the majority of people, earning thousands of dollars quickly leads to euphoria and greed and losing thousands of dollars quickly leads to depression and fear. Successful traders must learn to recognize and neutralize these destructive emotions. Warren Buffett has been quoted as saying, “Be fearful with others are greedy and greedy with others are fearful.” This may sound simpler than perhaps what is able to be implemented in reality. However, there is wisdom in Buffett’s point of view. Overall, the goal of keeping a neutral and balanced frame of mind, at all times, is a goal of many successful traders.
Please be advised that trading futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. The matter is intended as a solicitation to trade.
