When you take a look at the success rates of new futures traders, something almost seems to be amiss. Only 1 in 10 new traders will make a profit from trading long-term, and this figure is not exclusive to futures trading. What, then, are the keys to successful futures trading? You can find out more in this article.
Patience
Jumping into futures trading without any sort of preparation is a recipe for disaster. On the other hand, you don’t want to be paper trading for years before dipping your toes into the water. As with any other type of trading, it is crucial to have the right amount of knowledge and preparation before starting to trade futures. This includes having the right resources at your fingertips as well as the support you need from mentors who have been there, done that.
Managing Risk
One big mistake new traders make is not knowing how to manage risk properly. Before you even attempt to trade futures, you should have a firm understanding of your risk profile. If you do not have sufficient trading capital, futures trading is very likely not for you. With futures trading, you either have to be in for a full lot or a mini lot, as there is no such thing as a fraction of a lot.
Regardless of the margin you are putting in, you will need to have a clear idea of the drawdowns involved – and there are always going to be drawdowns. In order to successfully navigate these drawdowns, you will need a well thought-out trading strategy.
Trade the Plan
The best trading plans are flexible enough not to keep you reined in, yet specific enough to provide you with a sense of direction. Have you thought about what you are going to do if the trade ends up going against you? You will want to have stops that can get you out quickly when necessary, but you don’t want the stops to be so tight that you have no room to maneuver. When formulating a trading plan, always start with the trading ideas before applying risk controls.
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