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Using Stops Helps You Make Money Trading Futures
By: Harald Anderson
The following article presents the very latest information on Futures. If you
have a particular interest in Futures, then this informative article is required
reading.
The more you understand about any subject, the more interesting it becomes. As
you read this article you'll find that the subject of Futures is certainly no
exception.
To make money in the futures market, setting stops is at best an imprecise
science and to some an art form involving a lot of trial and error, but it is an
essential part of being a successful trader. An analogy is to compare the use of
stops to buying insurance. Both are a necessary evil for survival in business.
Should you avoid insurance altogether just because you’re not sure exactly how
much you need, or because it will cost you a little money? No. Instead, you
estimate and do the best you can, knowing in the end it will be well worth the
effort for your long term preservation.
Where insurance limits risk of loss due to unforeseen disasters, stops limit
your risk of loss on bad trade positions. Stops, properly placed, make it
possible to take small losses and get out of a trade when a futures position
moves against you, protecting your capital. Yet, some traders find the use of
them distasteful and are willing to risk large losses of capital on an ill
advised futures trade. Why do they do it? Simply because they don’t want to
admit that they made a mistake in predicting market direction.
A vital key to earning money in the market, one that often separates a good
trader from a bad one, is the ability to take small losses. Your goal, as a
successful trader, is to take small losses and make big gains. If you do this,
you’ll be profitable. But what if you are stopped out of a futures position you
still want to trade? There is a good chance you can
buy it back later, and most likely at a better price, if the trade still has
merit.
So far, we've uncovered some interesting facts about Futures. You may decide
that the following information is even more interesting. Those of you not
familiar with the latest on Futures now have at least a basic understanding. But
there's more to come.
Stops are valuable assists that should be used to limit risk and help you accept
small losses when you are wrong and because they protect profits on winning
trades. You must lock in your profit when you trade, or you can lose it. The use
of a trailing stop can ensure that you keep your gains. A trailing stop is a
stop order you place below the current price of a long position, progressively
moving it up as the price of the position increases so that the stop follows the
position up. Conversely, for a short position, you set a stop above the current
price and then move it progressively down, following the position as it trends
downward. This little technique will help keep you profitable and a happier
trader.
This means that once you have a profit, you move your stop nearer to the current
price so if and when the position moves against you, most of your new profits
are safe. If the stop executes and you decide you want to trade the position
again, you can buy it back at a better price than you sold it for and then ride
it up again. That’s how a good trader makes and keeps money; you make money in
the futures market by taking small profits multiple times and not risking too
much waiting for one big win. Remember, in all markets, the pigs get eaten.
Don Jesel, a surviving futures day trader of 20 plus years.
That's the latest from the Futures authorities. Once you're familiar with these
ideas, you'll be ready to move to the next level. When word gets around about
your command of Futures facts, others who need to know about Futures will start
to actively seek you out.
More information can be found at http://www.futurestradingsite.com
About the Author:
Don Jesel is an established surviving futures day trader of 20 plus years and
web master for www.futurestradingsite.com |
