Risk Management
Most futures traders make the mistake of not having a systematic way to deal with risk. The high leverage and high volatility of the futures markets tend to have a big effect on the emotions of traders. This emotional instability makes it hard to be objective and makes it hard to make good decisions. Have RESPECT for leveraged markets. The MARKET ALWAYS KNOWS BEST. So, the goal is to come up with a system and define the parameters of a risk-management system in detail. In this kind of system, profits and, more importantly, losses are set, and stop-loss orders are made.
ALWAYS USE STOP LOSSES!
Its goal is to try to limit how much you lose. But you should know that there is no guarantee that your stop loss order will be filled at the price you choose. Don't use mental stops - mental stops get moved.
In no way, shape, or form should you move or take away your stop-loss father.
Set your stops based on how much you can afford to lose on each trade. This amount is always a percentage of your account's balance. Most professional traders never put more than 2%–3% of their capital at risk on a single trade. Set your stop losses before you start trading, when you have a clear head and aren't going crazy because the trade isn't going well. You shouldn't move your stop loss until you've made a profit, and even then, you should only move it as a trailing stop.
Plan your exit strategy right away, before you even start the trade. Use an OCO (One Cancels the Other) order and both a protective stop and a profit target stop when you enter the trade. Putting in a money management order like this when you're not in the middle of a battle keeps you from making decisions based on how you feel. If you hear yourself saying, "I promise I'll sell this loser when it goes back to where I bought it," it's probably too late. The market doesn't know where you came from or care. Some traders get "married" to a position and then find it hard to get out of it when it goes against them.
Respect Price. Price is like a loaded gun that can go either way. Don't worry about what a trader, a report, or the news says it should do. You have to be impressed by what price can do! Don't buy or sell something just because the price is low or high.
Being different
Diversifying is the most important part of any trading plan. You could look at a number of markets with the same programme, or you could have a number of different programmes for the same market. This would give you more flexibility in different market conditions. It's well known that spreading money out over different markets can lower risk. Program A may only send signals for a certain type of market, while Program B may send signals for other types of markets. Using basic common sense rules, it is possible to keep a tight grip on trading capital. Professional traders tend to focus on just a few markets and learn everything there is to know about them.
You shouldn't have a trading plan that calls for putting on multiple contracts if that means you have to use most of your money for margin. The first rule you should follow when trading is to protect and keep your trading capital. The goal is to stay alive so you can take advantage of any market opportunities that come up.
Money Management
Managing your money and making sure you don't take on too much risk may be the most important thing you learn as a trader. Simply put, traders won't last long as traders if they don't know how to handle their money well and keep their losses to a minimum.
Managing your money is a must.
Money management is important if you want to not only do well in the market, but also stay in it. As with any other part of trading, there are no hard and fast rules about how to manage your money. How much money to risk and how many contracts to trade are two simple ways to describe money management. This is one of the most important things a trader has to think about. It affects your risk and profit, and traders often forget about it.
People think that the markets will give us profits when the time is right, and that we can't make the markets give us profits now. You can't know what will happen in the future, but you can put yourself on the "line of least resistance" and increase your chances of success overall.
Part 3 continues...
