7 Tips for Every Futures Trading You Must Know – Kuri007.com

In the world of futures trading, success can mean significant gains but mistakes can be very costly. That’s why it’s so important to have a strategy in place before you start trading. Here are 7 Tips for Every Futures Trading You Must Know.

1. Create a Trading Plan

The first tip cannot be emphasized enough: plan your trades carefully before you place a position. This means not only having a profit goal, but also an exit plan if a trade goes against you.

The goal here is to minimize the chance that you will have to make an important decision when you are already in the market with money at risk. You don’t want emotions like fear and greed to dictate your moves by luring you into holding a losing position too long or getting out of a profitable position too quickly.

A carefully crafted trading plan that includes risk management tools such as stop-loss orders, which we discuss below, or bracket orders, can help protect you from those mistakes.

For example, say you bought one December Silver contract at $20.00 an ounce. With bracket orders, you can set a stop loss exit at $18.00 an ounce and a profit exit at $25.00 an ounce. That way, you’re trying to limit your risk to $2 per ounce, while maintaining a potential profit of $5 per ounce.

2. Protect Position

Committing to an exit strategy in advance can help protect you from significant counter moves. Too many traders try to use “mental stops,” picking the price in their head when they are about to close a position and minimizing their losses. But it is too easy to ignore, even for the most disciplined trader.

To make your commitment even stronger, consider trading with stop-loss orders. The idea is to decide on a bailout point first, and then set a stop at that price.

One-trigger-other (OTO) orders allow you to place a main order and a protective stop at the same time. When the main order is executed, the protective stop is triggered automatically.

This frees you from having to constantly watch the market, and relieves you from having to worry about entering your stop orders at the right time.

Just remember, there is no guarantee that the stop order execution will be at or close to the stop price. Stops are no guarantee against losses-markets can sometimes move quickly through them. In most cases, however, quitting will help you keep your losses at a manageable level and keep your emotions away from them.

3. Narrowing the Focus, But Not Too Much

Don’t spread yourself thin by trying to follow and trade too many markets. Most traders have their hands full following several markets. Remember that futures trading is hard work and requires a large investment of time and energy. Studying charts, reading market commentary, staying on top of the news—it can be overwhelming for even the most experienced traders.

If you try to follow and trade too many markets, there’s a good chance you won’t give any of them the time and attention they need.

The opposite is also true—trading only one market may not be a great approach, either. Just as diversification in the stock market has well-known benefits, there are also advantages to diversifying your Futures Trading.

For example, you expect the price of gold to fall, but the market for cocoa will rally. If one of those expectations proves wrong, while the other is right, you can offset losses with gains.

4. Trading Speed

If you are new to futures trading, don’t floor the accelerator. There is no reason to start trading five or 10 contracts when you are just starting out. Don’t make the rookie mistake of using all the money in your account to buy or sell as many futures contracts as you can.

Occasional drawdowns are unavoidable, so you should avoid building large positions where just one or two bad trades can wipe you out financially.

Instead, start slowly with one or two contracts, and develop a trading methodology, without the added stress that comes with managing larger positions.

Tweak your trades as necessary, and if you find a style or strategy that works well then consider increasing your order size.

If you are a new futures trader or a veteran who has hit a rough patch, you might also consider reducing your contracts. In some cases, exchanges offer E-mini futures and E-mini futures micro products that are identical to the standard futures product except that they are smaller.

The CME Group, for example, offers E-mini S&P 500 futures contracts that are identical to S&P 500 futures contracts, except that they are only one-fifth the size. There are similar mini-Products in the grain, energy, currency and metals sectors. Once you find a strategy you like, you can slowly increase your order size.

5. Think Long And Short

Trading opportunities exist in both rising and falling markets. It is human nature to look for opportunities to buy into, or “go long” markets. But if you are not also open to “going short” markets, you may not need to limit your trading opportunities.

Here’s an example: suppose a trader believes the price of crude oil will fall and looks to take a position by selling December crude oil futures at the current price of $50.00 per barrel, hoping to buy back the futures contract at a later date at a profit should the futures price fall. under $50.00 per barrel.

With futures you can sell the market or buy the market. You can buy first, and then sell contracts to close your position. Or, you can sell first, and then buy contracts to offset your position.

There is no practical difference between trading no matter what order you sell or buy, you must post the required margin for the market you are trading. So, don’t discount opportunities to go short.

6. Learn From Margin Calls

If you’re being hit with a margin call, it’s probably because you’ve been sticking with losing trades for too long. So, consider treating a margin shortfall as a wake-up call that you’ve become emotionally attached to a position that didn’t pan out as planned.

Rather than transferring additional funds to fulfill calls or shrinking your open positions to reduce your margin requirements, you may be better off exiting a losing position entirely. As the old trading expression goes, “cut your losses,” and look for the next trading opportunity.

7. Be patient

Don’t get so wrapped up in the market action that you miss the bigger picture of trading. You obviously have to monitor your work orders, open positions, and account balance. But don’t hang on to every uptick or downtick in the market.

Not only can you drive yourself crazy, but you can also be thrown by tiny zigzags or whipsaws that seem formidable and significant at the time but ultimately prove to be mere intraday twinkles.

In other words, try to maintain a bit of a long-term perspective. Extending the duration of your trade can work better than trying to trade every move in the market.