Rules for Futures Traders
Do not overtrade.
= Take a position only
when you know where your profit goal is and where you are going to get out if
the market goes against you.
= Trade with the
trends, rather than trying to pick tops and bottoms.
= Don't just trade the
= Calculate the
risk/reward ratio before putting a trade on, then guard against the risk of
holding it too long.
= Use technical signals
(charts) to maintain discipline – the vast majority of traders are not
emotionally equipped to stay disciplined without some technical tools. Use
discipline to eliminate impulse trading.
= Trade with a plan –
not with hope, greed, or fear. Plan where you will get in the market, plan how
much you will risk on the trade, and plan where you will take your profits.
= Let profits run. Now
to the "letting profits run" side of the equation. This is even harder because
who knows when those profits will stop running? Trade all positions in futures
on a performance basis. The position must give a profit by the end of the second
day after the position is taken, or else get out.
= Don't trade on
rumors. If you have, ask yourself this: "Over the long run, have I made money or
lost money trading on rumors? O.K. then, stop it.
= Beware of all tips
and inside information. Wait for the market's action to tell you if the
information you've obtained is accurate, then take a position with the
= Don't trade unless
you're well financed...so that market action, not financial condition, dictates
your entry and exit from the market. If you don't start with enough money, you
may not be able to hang in there if the market temporarily turns against you.
= Be more careful if
you're extra smart. Smart people very often put on a position a little too
early. They see the potential for a price movement before it becomes actual.
They become worn out or "tapped out," and aren't around when a big move finally
gets under way. They were too busy trading to make money.
= Analyze your losses.
Learn from your losses. They're expensive lessons; you paid for them. Most
traders don't learn from their mistakes because they don't like to think about
= If you're just
getting into the markets, be a small trader for at least a year, then analyze
your good trades and your bad ones. You can really learn more from your bad
= Always…. Always…..
Always use stop loss.