I often write about the hazards and difficulties involved with trading futures. It takes a high level of discipline and consistency, mental toughness, the ability to preserve during times of adversity, knowledge, etc.
New traders with trading ambitions should, by all means, investigate trading and experiment on paper. But dont be so quick to lay the money on the line. Be sure you feel comfortable with your style, and above else, be sure that you are risking only money you can afford to lose.
In fact, when opening an account… you may as well just mentally write it off as a loss already. Consider it gone. Then, go about trading in a defensive, careful, and methodological manner. If this money is not „mentally written off“, or if this money is needed to pay bills, then you dont stand a shot because the pressures of having to perform will eat you alive and hinder rational thinking.
An alternative is the stock market. I am a true believer in the benefits of long term investing in strong companies. The stock market is safer than futures and thus more suitable for the average investor.
Of course, there is risk in stocks, too. But a half way disciplined investor that follows strong companies with decent earnings growth… and buys on the pullbacks… can do fairly well over a long period of time.
I truly believe that before anyone takes the plunge into the futures game, they should already own their own home, have a diversified portfolio of long term investments for retirement, kids education, etc.
Far too many hard working, well intentioned „traders“ get burned in pursuit of a quick riches. There is no such thing as getting rich quick in futures. Everyonce in a blue moon a new trader makes it big with a lucky trade. Well, everyonce in a blue moon an individual wins the lottery, too…
While you have money in investments… and after you have taken the time to learn about the stock market, the economy, etc… then take the time to learn about futures.
But even before looking into futures… those with stock portfolios and a net worth of six figures should investigate the use of stock options to generate handsome returns. Writing nked puts, for example, allows one to collect premium while waiting for a good stock to pullback to a level that is an attracted buy.
In fact, when opening an account… you may as well just mentally write it off as a loss already. Consider it gone.If and when futures, or options on futures are traded… be sure to have the basics down pat.
Learn to identify a trend, support and resistance, and learn simple, basic, and low risk entry strategies to enter in the direction of the trend. Always limit your risk and use protective stops. „Technicaly based“ stops are best rather than using a fixed dollar amount per trade.
Practise, practise, practise on paper. Focus on exits, trying to strike a balance between preserving capital and reducing risk, and giving the trade room to breathe. This is subjective and takes practise. Have a detailed, written trading plan that describes all aspects of your system.
Be organized. Maitain proper records, keep a log and dairy updated and current. Keep all analysis up to date, etc. Investigate principles of trading psychology and try and cultivate a winnerss attitude, discipline, patience, consistency.
Keep an open mind and be receptive to new ideas. Once a basic, core philosophy is embodied, strive to „fine tune“ your trading and methodology by integrating advanced concepts like trend analysis on multiple time frames for identyfying additional opportunities, reducing risk, etc.
Lastly – be patient. The markets arent going anywhere. There is ALWAYS ample trading opportunities, and no such thing as a „once in a lifetime opportunity“. Take your time and learn the ropes before risking any money. Above all else, preserve capital… and this is best done by staying out of the trading arena until adequately prepared.