The more you understand about any subject, the more interesting it becomes. As you read this article you'll find that the subject of Futures is certainly no exception.
To make money in the futures market, setting stops is at best an imprecise science and to some an art form involving a lot of trial and error, but it is an essential part of being a successful trader. An analogy is to compare the use of stops to buying insurance. Both are a necessary evil for survival in business. Should you avoid insurance altogether just because you're not sure exactly how much you need, or because it will cost you a little money? No. Instead, you estimate and do the best you can, knowing in the end it will be well worth the effort for your long term preservation.
Where insurance limits risk of loss due to unforeseen disasters, stops limit your risk of loss on bad trade positions. Stops, properly placed, make it possible to take small losses and get out of a trade when a futures position moves against you, protecting your capital. Yet, some traders find the use of them distasteful and are willing to risk large losses of capital on an ill advised futures trade. Why do they do it? Simply because they don't want to admit that they made a mistake in predicting market direction.
A vital key to earning money in the market, one that often separates a good trader from a bad one, is the ability to take small losses. Your goal, as a successful trader, is to take small losses and make big gains. If you do this, you'll be profitable. But what if you are stopped out of a futures position you still want to trade? There is a good chance you can buy it back later, and most likely at a better price, if the trade still has merit.
So far, we've uncovered some interesting facts about Futures. You may decide that the following information is even more interesting. Those of you not familiar with the latest on Futures now have at least a basic understanding. But there's more to come.
Stops are valuable assists that should be used to limit risk and help you accept small losses when you are wrong and because they protect profits on winning trades. You must lock in your profit when you trade, or you can lose it. The use of a trailing stop can ensure that you keep your gains. A trailing stop is a stop order you place below the current price of a long position, progressively moving it up as the price of the position increases so that the stop follows the position up. Conversely, for a short position, you set a stop above the current price and then move it progressively down, following the position as it trends downward. This little technique will help keep you profitable and a happier trader.
This means that once you have a profit, you move your stop nearer to the current price so if and when the position moves against you, most of your new profits are safe. If the stop executes and you decide you want to trade the position again, you can buy it back at a better price than you sold it for and then ride it up again. That's how a good trader makes and keeps money; you make money in the futures market by taking small profits multiple times and not risking too much waiting for one big win. Remember, in all markets, the pigs get eaten.
Don Jesel, a surviving futures day trader of 20 plus years.
That's the latest from the Futures authorities. Once you're familiar with these ideas, you'll be ready to move to the next level. When word gets around about your command of Futures facts, others who need to know about Futures will start to actively seek you out.
More information can be found at http://www.futurestradingsite.com
You can't enter the world of day trading on a few well rubbed nickels. Jumping in and developing good trading skills takes some time as well as some money. Most new traders do not find immediate success, even short lived success, until after they have spent the money and time learning the process and learning how to recover from the inevitable mistake. Your perception of the money that isn't readily recovered is going to determine whether you stick with it and end up profitable or end up shelling out just to quit.
If you opted to change careers midstream and you needed to get a different education in order to do that, you would shell out quite a bit in tuition, books, perhaps a computer, and of course all the extra little needs that crop up along the way. This is no different. When you are learning the fine art of day trading you do have to take into consideration that you are receiving a very valuable education, and just like all other forms of education, that requires an investment in you first.
You are going to make bad trades and mistakes. Everyone does. It is part of learning the process, learning how to develop yourself, and part of the education that you are receiving. If you never make a mistake, you aren't taking any risk at all, which means you aren't applying anything you're learning. Those losses are part of the total tuition it takes to get to the place you want to go.
For so many traders in their first year, this particular building block is the one that shuts them down. Guilt finds its way into the picture and before you know it a novice trader with good potential shuts down their laptop and walks away from what could have been. If you enter into day trading with the understanding that you are going to spend some money, lose some money, and eventually recoup the money, then you will. If you walk away without investing in yourself, your day trading ideals and hopes just washed away.
Plenty of us have a hard time justifying a self investment. We will invest in everything from our cars and wardrobe to our family members before realizing the value of a self investment. An investment in our future is also an investment in everyone and everything around us. When we are more fulfilled, more financially sound, and while we are putting forth the effort into making us better in any direction we are also positively influencing those around us. We are happier when we structure our lives the way that it works best for us. When we are happier people, those around us are happier and gain from our sense of self improvement.
Most of us were taught to put ourselves second, that when we have others in our lives we were supposed to "make others happy first." We were either taught this through example or verbally. This leaves us with an overwhelming sense of guilt when we are spending money on something that we believe will better our lives but hasn't been proven yet, especially if we are running into resistance from family members. It doesn't have to be this way.
Every individual has a right to happiness, not just its pursuit. And by improving your life you are showing those around you that you are devoted to everyone's needs, including your own. You can't run a car without fuel just as you can't tend to others without fuel. Making positive changes in your life creates fuel.
While resistance, offhand commentary, and an internalized sense of guilt may become a chronic battle for you, you can determine your own worth in the picture and proceed without guilt, should you choose. There can be great joy for everyone involved if you simply allow your joy to spread. When those around you see that you are doing something good, even if the bank account isn't reflecting it quite yet, they will soon realize that your change is positive. And if they don't, well, they aren't the ones living your life.
Both Harald Anderson & Terry Leslie are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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