According to a 2010 study published by the University of California, 80 percent of short-term traders new to the market quit within two years. In financial circles, the general consensus estimates that 95 percent eventually opt for an early exit from the market. No matter which statistic is closer to the truth, probability appears to be overwhelmingly stacked against the trader.
Although a frequently overlooked aspect of trading, risk management may be the most important element of overcoming these seemingly insurmountable odds, it’s absolutely essential to sustaining longevity in the marketplace.
Clearly defining how to enter and exit the market is a great place to start making risk management work for you.
Actively engaging the futures markets presents many opportunities and challenges. In order to prosper in such a dynamic atmosphere, a trader must have a comprehensive strategy for entering and exiting the market with maximum efficiency.
Fortunately, traders have access to a variety of tools that boost trade-related efficiency. Unique order types ensure that the objectives of each trade are not compromised:
Any trades are educational examples only. They do not include commissions and fees.
Limit orders are typically used to buy or sell retracements of price action. The following example shows how stop and limit orders may be used for a clear-cut futures trade execution:
Using stop and limit orders to execute this trade has several advantages:
However, there are a few drawbacks to executing trades using a limit order strategy:
Ultimately, limits and stops promote precision. They may not be optimal tools for every market, but through experience and study they can become a valued weapon in the trader’s arsenal.
Any trades are educational examples only. They do not include commissions and fees.
Achieving long-run success in the markets is equal parts discipline, strategy, and desire. A trader must have a viable strategy for engaging the markets, the discipline to follow it consistently, and the desire to never stop competing in the face of adversity.
If you’re interested in crafting a strategy built for winning in the long run, having cutting-edge technology at your disposal is a must. Check out our StoneX One platform for advanced functionality coupled with a user-friendly interface.