Trading futures is complex but has the potential to turn a significant profit.
Whether you’re new to trading, or you’re an experienced trader, it can be easy to fall into bad habits.
Having a strategy can put you in the best position to succeed.
Here are some of the best tips to improve your futures trading strategy.
1. Establish A Trade Plan
Plan your trades carefully before you establish a position in the market. This means that you must have a profit objective and an exit plan in case the trade goes against you.
Having a trading plan that has both of these things can help to minimize how often you find yourself in a situation where you need to make decisions when you already have money at risk.
With no trade plan, your emotions could influence you to hang on too long or to exit too soon. An exit strategy could protect you from holding onto large losses or letting large profits go.
Futures trading will always involve risk, so decide on your bailout plan, using resources like Delta Trading Group reviews, before you enter the market. A good plan will let you make trading decisions in a calm, rational manner.
2. Protect Your Positions
A lot of traders use mental stops, where they pick a price in their heads when they will close out a position to minimize their losses. However, these stops are easy it ignore, no matter how experienced a trader you are.
Think about trading with stop-loss orders in place. Decide on a bailout point, and set a stop at that pierce. With a One-Triggers-Other order in place, you can have a primary order and protective stop in place at the same time.
When the primary order comes into play, the protective stop will be triggered automatically. This means you don’t have to constantly watch the market or worry about entering your stop order at the right moment.
Remember that stop orders are not a guarantee against losses, as markets can move quickly through them. In most cases, a stop will keep your losses to a manageable level, with no emotion involved.
3. Narrow Your Focus, But Not Too Much
Don’t spread yourself thin by trying to follow and trade too many markets. Most traders will have enough to deal with to stay up-to-date with only a few markets. Futures trading takes a lot of time and energy. Even for seasoned traders, the amount of work can be a lot.
If you trade too many markets, you won’t be able to give any of them enough time or attention. Trading in just one market isn’t right either. In the same way that diversifying your stock market portfolio has benefits, diversifying your futures trading does too.
For example, perhaps you expect cocoa prices to decline, but you turn out to be wrong. However, you also suspect gold prices to rise, and this is correct. The gains you make on gold could make up for the loss you made on cocoa.