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Futures Day Trading for Beginners

| March 8, 2024 | By

Every year, legions of aspiring traders enter the futures markets hoping to make a living buying and selling contracts. The upsides are obvious: financial and personal freedom. Unfortunately, the number of losing traders far exceeds the tally of winners.

Be forewarned: The path to becoming a winning trader can be long and treacherous. Nonetheless, if you’re interested in a career in the markets, then a few lessons on day trading for beginners can help you avoid hidden pitfalls and even financial catastrophe.

Lesson 1: The Personal Inventory

The old axiom “Know thyself” is especially relevant in futures trading. Before ever placing a market order, it is imperative that you have a good idea of your strengths and weaknesses.

Understanding your competencies in several key areas is useful in optimizing performance:

  • Quantitative reasoning: Futures trading is a numbers game. Price levels, technical tools, and fundamental analytics are all expressed numerically. If your arithmetic skills aren’t up to snuff, work to improve them immediately.
  • Attention span: Day trading takes long hours of study and evaluation. The ability to maintain focus for long periods of time is an inherently valuable trading skill.
  • Resilience: Losing money is an unavoidable aspect of active trading. Accordingly, being able to quickly bounce back from a loss is a key part of achieving long-term success in the markets.

If you wanted to write a book titled Day Trading for Beginners, conducting a personal inventory would be a great first chapter. Remember, no one is perfect―being in tune with your capabilities is essential to winning in the markets.

Lesson 2: Secure Adequate Resources

No matter what type of trader you are, there are several resources that must be secured before entering the markets. Having a basic amount of the following assets is non-negotiable:

  • Risk capital: The beauty of modern futures trading is that you don’t need $100,000 to get started. However, a sufficient amount of money is necessary, specifically one large enough to allow you to safely pursue your financial objectives.
  • Knowledge: Although it is impossible to know everything about the capital markets, a robust knowledge base is required. Market behavior, the value of technical and fundamental analysis, and how to operate your software platform are three essential areas of study.
  • Time: Making money in futures takes time. From hands-off systems traders to discretionary participants, minutes, hours, days, and months will be required.

No ifs, ands, or buts―you must have money, knowledge, and time to have a shot at winning in the markets. If any of these inputs is lacking, your bottom line will become a product of dumb luck, not skill.

Lesson 3: Build a Trading Plan

No matter whether you’re changing a light bulb or trading corn futures, you need to have a plan. In the case of active trading, a comprehensive plan gives structure to the way you conduct day-to-day business. Without a plan, market participants are prone to fall victim to the hazards of undisciplined, emotional trading.

Although a curriculum labeled “day trading for beginners” sounds elementary, building a viable trading plan is anything but. These three facets, which vary in complexity, serve as integral parts of any strong trading plan:

  • Trade selection: Identifying opportunity in the marketplace is a critical element of the trading plan. The plan uses strategic principles to determine when market conditions warrant entry.
  • Trade management: Trades may be executed in countless ways. The trading plan dictates the order types to be used as well as when to take profits or cut losses.
  • Money management: Implementing the proper tenets of money management is the key to sustaining profitability. Money management involves three key tasks: aligning risk to reward, understanding position sizing, and preserving accounts.

A comprehensive trading plan includes parameters governing trade selection, execution, and money management. When applied to the market consistently, a good plan produces quantifiable, replicable results.

Futures Day Trading for Beginners

In reality, day trading for beginners is a deep and broad topic. Nonetheless, after completing a self-inventory, gathering necessary resources, and building a plan, you’ll be well on your way to participating in the futures markets.

Download the eBook: Futures and Options Strategy Guide