How to Use Pivot Points with Support and Resistance

We have attempted to give you a background in trading.  Overall I learned to trade from Dr. Alexander Elder’s Book and Workbook, “Trading for a Living” back in 1996.  I actually failed the tests in the workbooks several times before I got it right.  I still think that that book is a classic and in a class all by itself. 

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The media, particularly television, has a profound effect on the development of public consensus which can drive movement in the markets. People believe what they hear in the news, particularly on television. The prognostications of television economists and financial experts bombard the public, molding public opinion and forming consensus. The problem is that the views of only a small number of people are aired, but aired repetitively, lifting their judgments from the realm of personal opinion to widely accepted fact. The savvy futures trader can make use of this phenomenon.

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Futures trading is a risky business. The untrained, unwary, unknowledgeable, undisciplined or sometimes plain unlucky can lose a fortune — and in an agonizingly short time. In fact, the SEC requires futures trading websites to post a disclaimer concerning the potential risks involved in trading commodity futures. You’ll find a full disclosure statement on my Futures Trading Secrets website.

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Futures traders use stop losses to minimize financial risk and prevent unexpected catastrophe. A stop loss is like an insurance policy. As the name implies, its purpose is to stop losses. A powerful money management tool, stop losses allow the savvy futures trader to manage his losses, to keep them small and contained. Properly applied stop losses can mean the difference between success and failure for futures traders.

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Futures contracts are written for a specific, finite time period which means they must be rolled over on a regular basis to remain viable. Some contracts, such as crude oil, expire and need to be rolled monthly. Others, such as cotton or gold, expire and can be rolled only on certain specific months of the year. Expiration dates are specified in the contract and will vary with the asset being traded. Before you buy a contract, you should know what the expiration date is and what your rollover options are. Rollover dates are standardized for contracts of different asset classes and are set by each exchange. It’s important to know and track the specific expiration dates and requirements of futures contracts you purchase so that you don’t miss those all important rollover dates.

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Understanding the risk/reward ratio and incorporating it into your futures trading tactics is essential if you want to succeed as a futures trader. Learning to use the risk/reward ratio can help you minimize your risks and maximize your trading profits.

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In 1982 the futures markets started trading options. The appeal of trading options as opposed to futures is the potential to increase profit — often substantially — while limiting risk.

What is an option on a future? An option gives the buyer the right but does not obligate him to buy or sell a particular futures contract at a set price at any time prior to a specific date. When the option is exercised, it is the actual futures contract that is delivered to settle the transaction, not cash.

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Futures traders use two types of stop losses when they trade: mental stops and physical stops. It’s important to understand the difference between the two and figure out how and when to use them. The purpose of a stop loss is to limit your trade losses. When traders set a stop loss, they are determining the specific price at which they will sell to limit their loss — in other words, their exit strategy.

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Becoming a successful futures trader doesn’t happen overnight. You don’t read a book and Voila! another successful futures trader dazzles Wall Street. It would be nice, but it’s just not going to happen. Once you decide to become a futures trader there’s a lot of hard work ahead.

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Loss is the futures trader’s bugaboo, that annoying little wisp of fear in the back of your subconscious that keeps you from pulling the trigger and achieving success. To succeed as a futures trader you have to squelch thoughts of previous failures and concentrate on learning the new skills that will lead you to success.

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