The futures markets are dynamic, competitive atmospheres where opportunity and risk collide on a daily basis. Participants from around the globe attempt to hash out a living, with only the most successful futures traders ascending to elite status. If nothing else, the futures marketplace is a premier example of economic Darwinism.
As with most disciplines, there are certain elements of active trading to avoid and some to embrace. In this post, we’ll take a look at a few of the do’s and don’ts of futures trading.
The Do’s of Successful Trading
No matter what type of trader you are, similar habits typically accompany success. Whether you practice an intraday, day or swing trading approach, a solid routine is an important part of being consistent. In order to accomplish this objective, most successful futures traders do the following things to ensure they maintain a winning edge:
- Premarket preparation: Studying the tendencies of a market’s behavior as it pertains to periodic volatility and liquidity is an important part of competent trading. Also, regular computer and software platform maintenance is essential to efficient trading.
- Game plan for the coming session: Accounting for the day’s economic calendar and potential market drivers before active trading begins can help identify opportunity while limiting risk. Breaking down relevant technical levels and potential order entry/exit points ahead of time is a great way to guarantee your strategy is executed flawlessly in the live market.
- Post-market performance evaluation: Taking an inventory on the successes and failures of the day is an essential part of growing as a trader. Without an ongoing scrutiny of performance, trader development becomes impossible.
As the old saying goes, “victory loves preparation.” However, any veteran trader will tell you that simply being ready for the opening bell to ring isn’t enough. Achieving success in the markets is dependent upon consistently building solid plans and following them with discipline, as well as growing from past wins and losses. Most successful futures traders excel in these three areas on a daily basis.
The Don’ts of Successful Trading
When it comes to achieving longevity in the marketplace, there are literally hundreds of things not to do. The road to success seems fairly straightforward ― make more money than you lose. Easy, right? Just don’t compromise profitability and everything is good. Right?
Well, active futures trading isn’t that easy. Even if you have a viable trading plan and the dedication to carry it out religiously, external factors can kill profitability. Anyone who makes a living in the markets is well aware of the following don’ts:
- Trade emotionally: Emotional trading is the number one destroyer of profitability. Bad habits like overtrading and euphoric risk taking can quickly blow out an account balance. Staying even-keeled is the name of the game.
- Lose respect for money: This item seems intuitive, but can be a terribly negative influence on a futures trader. It’s important to be somewhat detached from the actual real-world value of a dollar when assuming financial risk. However, when all respect for your capital is gone, it becomes much easier to take wild, unnecessary risks.
- Become complacent: The human psyche can get used to almost anything. Making and losing money in the markets is certainly no exception. Many traders fall victim to this phenomenon and grow accustomed to taking losses and smaller-than-expected gains. Both of these practices make aligning risk to reward impossible, undermining any chance at long-term success.
The human element can be a devious adversary, especially when it comes to active trading. Most successful futures traders respect this truth and take steps to mitigate the negative impacts of emotion-based trading as well as complacency.
Most Successful Futures Traders Had to Start Somewhere
One of the great things about futures trading is that an opportunity to succeed is available to all who enter the markets, every single day. Some traders have greater resources, but everyone starts even at the opening bell.
For more information on how to make the futures markets a productive part of your financial game plan, check out the service suite at StoneX. From a team of experienced brokers to a robust self-directed trading infrastructure, StoneX furnishes traders with everything needed to flourish in the marketplace.
