There is an art to pulling the trigger that futures traders must learn if they are to achieve success. Setting up and learning your system, studying and knowing the market, reviewing your charts and watching your indicators — all these important elements of futures trading come together in that critical moment when you pull the trigger.

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There are a number of qualities that define a successful futures trader — the keys to success.

1. Discipline. Discipline is the primary key to successful futures trading. You must have the discipline to learn your system, study it daily and tweak it to perfection. You must have the discipline to keep a trading log that records your trades, as well as the market conditions, thought processes and external influences that affected each trade. Without such a log, you are doomed to repeat your mistakes, rather than learning from them. You must have the discipline to do your homework, to study and keep up with the market, to keep your system current.
2. Patience. You must be patient if your trading system is to be effective. By trading too soon, you negate the value of your trading system. You must exercise patience and give your system time to work.
3. Loss. Loss is part of the trading game. You must be able to take losses in stride and get right back in the game. When your system dictates that a loss be taken, you must have the discipline to follow your system, take the loss quickly, minimize the damage and move on.
4. Perseverance. There are no overnight success stories in futures trading. Success is a matter of building experience, working and perfecting your system, minimizing losses, and capitalizing on small gains. Success, particularly at the beginning, is more often a series of small steps than giant leaps.
5. Confidence. Above all, a futures trader must have confidence in himself. You must have confidence in your system and your ability to work your system — to pull the trigger. Futures trading is a game of risk. You can’t be afraid to act. You must have confidence in your ability to read your system and act. Those who hesitate are doomed to lose in the futures trading game.
6. Flexibility. The market and market forces are ever-changing. You must have the flexibility to change with the times, to make changes to your system so it remains viable and in tune with current market conditions.

There are four key elements to achieving success as a futures trader:

1. Self-confidence
2. Discipline
3. Ability to handle loss
4. Profitable trading system

Self-confidence. If you aren’t confident that you can become a successful futures trader, you might as well pack it in now and save yourself a lot of grief. Successful futures traders are bold, aggressive and self-assured. They do not lose faith in themselves when they lose. They have the courage and self-confidence to keep trading. Futures traders are risk takers. We are the Mario Andrettis of Wall Street.

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“Back up and look at the big picture.” That’s good advice for futures traders. Moving averages help us sort through sometimes chaotic price variations to see what is really happening in the market. Moving averages allow us to see the forest through the trees. By stripping away price volatility by removing both unusually high and low price variations from consideration, moving averages show us the actual underlying trend.

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Moving averages are one of the oldest trading tools. Futures traders use moving averages to reveal the underlying trend behind short-term price variations. Moving averages are a valuable indicator that can be used with other indicators to trigger buy signals.

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Popularized by legendary futures trader George Lane, the stochastic oscillator (commonly called stochastics) is a timing indicator widely used by futures traders to indicate overbought or  oversold positions. Stochastics compares closing price to price range over a specified time period. The driving principle can be summarized as follows: (more…)

Futures traders come in all flavors but it’s basically a Neapolitan world. You can be a scalper, swing trader or a combination trader. Mindset and methodology generally determine in which sector of the futures trading world you’ll thrive.

Scalpers. Scalpers seek immediate gratification. They look for short-term market movements seeking to shave money off the bid/ask price spread. Holding each position for only a  very short period of time (often only minutes) to minimize risk, scalpers make small gains through rapid trading. (more…)

Futures contracts are complex financial instruments and trading them demands constant daily, even hourly, monitoring. When you trade futures, there are myriad shifting variables that must be monitored continuously. Trading futures is about minimizing risk and maximizing profits. Profits are often made on small price points in an interval of minutes. To make money, you have to be there, in the game, ready to grab an opportunity when it appears.

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We’ve spend some time lately talking about commodities. Anyone who trades futures on the commodity markets ought to know a considerable amount about what they’re trading. But commodities are not futures.

• Commodities are a class of assets that includes energy, metals, agricultural products, natural gas and oil, and other natural resources. Commodities are natural resources, actual physical objects with an inherent value of their own.
• Futures are investment vehicles through which you invest in commodities. Futures can also be used to invest in other asset classes such as currencies, bonds, interest rates, stocks, indexes, etc. Futures have no value in and of themselves. They are known as derivatives because they derive (or take) their value from the underlying financial instrument (i.e., the commodity, currency, stock, etc.)

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Even when the world is at its most turbulent, commodities provide a safe haven for futures traders. Commodities are inelastic goods. In economics, elasticity quantifies how price changes affect supply and demand.

Elastic goods exhibit a high correlation between price and demand. When the price of the good goes up, demand decreases. Elastic goods are generally less-essential goods, meaning that you can live without them or at least use less of them or substitute a less expensive option. The dance between price and demand can be complex. For example, when the cost of milk rises, people buy less milk and fewer milk products. Some people will stop buying milk altogether until the price comes back down. Families with young children who still need milk will serve their children less milk or milk with a lower fat content and, therefore, cheaper price tag. They may substitute enriched soy milk or calcium supplements and calcium-fortified breads and cereals to ensure their children get a full dose of bone-building calcium. Sales on cheese, ice cream and other dairy products will plummet in concert with how necessary they are perceived to be. Ice cream is considered a luxury so when ice cream prices rise, sales fall.

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