The following article presents the very latest information on Futures. If you have a particular interest in Futures, then this informative article is required reading.
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.
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