The Top Futures Traders Trade What They See

To become one of the top futures traders you will need money and a plan. You will need sufficient funds to trade futures contracts and you will also need a good plan or trading strategy to make sure that money grows. An inadequate trading strategy will lead to your money quickly disappearning, no matter how much you may have.

Making Money or Being Right

One thing you will need to understand is that you will never be right 100% of the time. This is practically impossible when it comes to trading. Your goal, though, is to ensure that you have enough winning trades to turn a profit, even if this means being right only 50% of the time.

The problem, though, is that people tend to want to be right all of the time and they succumb to their emotions which are telling them there is no way they can be wrong. Unfortunately, by the time they have woken up to reality they are already pretty close to their margin call and end up losing a lot of money.

You shouldn’t be competing against the market in a “who is right” more often contest because if you try to you will end up losing. Your purpose for trading is to make money so it doesn’t matter if only 50% of your trades are winning trades as long as your overall results generate a profit. This means you need to limit your losses as much as you can, which you do through stop orders.

Stop orders allow traders to specify a price they want to exit at if the trade is going against them. The exact level of the stop order depends on different trading styles. Some traders set a stop loss order that is an absolute number while others calculate it as a percentage of the potential profit. However, no matter how it is calculated, the stop loss order is a vital risk management tool for top futures traders.

Top futures traders will trade the charts according to what they see, rather than what they want to see. By not feeling the need to be right all of the time, they can objectively analyze how the market is moving and are prepared to incur a small loss and exist a losing trade to save a lot more in the long run. It’s equivalent to sacrificing a few for the benefit of many. You are better off losing a few hundred than losing a few thousand or even more.

Greed Kills

Another problem many novice traders have is that once they are in on a winning trade, rather than closing out the trade when they have made a profit or according to their trading strategy, they hang on to the trade hoping to make even more money. Unfortunately, though, they often end up losing any profit and even part of their capital when the market changes direction, as it always does.

This is why top futures traders suggest that traders move their stop loss orders to a point where they can maintain profit. If the market keeps going in the right direction, then stop loss orders should be moved as well, increasing by a number equal to that of the market growth. So, if the market goes up by 50 cents, then the stop loss order should be increase to a level greater by 50 cents.

While financial knowledge is critical to becoming one of the top futures traders, being able to control your emotions when trading is just as important. You need to be detached and trade according to your plan, if you want to succeed.

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