The futures market can be exciting and financially rewarding, but it's a dangerous place for a dreamer. If you want to be successful in the futures market, start with the recognition that trading is a business, not a hobby. Becoming a pro requires more than a desire to make money. People who make the best futures traders are knowledgeable and have a passion for their work.
Develop and execute a trading plan. It's an essential initial step used to guide the handling of your trades, such as determining when you enter and exit a trade or how much risk you'll take.Traders with no pre-determined trading plan are flying by the seat of their pants and that's usually a recipe for crash and burn, Jim Wyckoff wrote in Futures Magazine. Realize that ideas stored in your head do not constitute a sound plan. Thoroughly consider your approach and write it down.
Save enough money to allocate specifically to trading before you begin. You can start trading futures with $5,000 or $500,000. What's most important is that you don't trade with money for your mortgage, retirement or other living expenses. You must also respect money, like a professional. Don Dawson, an instructor for the Online Training Academy, says most professional traders live below their means though they can afford more lavish lifestyles. Successful traders recognize they're in a business where it's important to have rainy-day funds.
Ignore the hype and realize the futures market is not a get-rich-quick scheme. Have realistic expectations about the time required to learn and earn. To be successful, you must devote adequate time and commit to ongoing education, says Dawson. You have to be disciplined and put in the necessary work, which includes analyzing short-term and long-term technical indicators and fundamentals of the market you trade.
Manage your money properly. If you use too much money for high-risk trades, there's a good chance you'll lose it all very quickly. Use tools to help you protect your capital, such as protective stops designed to limit your losses. And don't remain in losing trades too long, gambling on hopes of them turning in your favor. That's an amateur mistake successful traders don't make.
Trade the trend because trading against it is extremely risky and few people do it well. Some people see a market going up and despite the lack of technical evidence, bet it's going to go down. Most people who try to predict the tops and bottoms of markets make major mistakes, says Wyckoff.
Define personal short-term and long-term goals. Determine what you want from your trades and how trading should impact your life. Doing so provides a roadmap to measure improvement and progress, says IIan Levy-Mayer of E-Futures.com. Break your goals down into small steps, says Levy-Mayer, and you’ll always know whether or not you’re on the right track.
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