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. 

A second principle I learned from Alex, is that trading is a triune skill of Mind, Money and Method.  It is the basis of our training program.  With the mental and money management the most important skills.  But like a three legged stool, if you cut off one leg, you can’t sit down.

In the Method area, which I will share with you one part of the method, you have three parts as well.  One of them is how to use Support and Resistance in your trading.  We use these daily Support and Resistance areas as targets.  Why do they work so well?  It is because other traders “Think They Work”.  Remember in your trading your job is not to think, but to observe what is happening right now.

Check out this short video on Support and Resistance  associated with Pivot Points and how we use it. 

The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.  Our recommended software calculates all of this automatically, however we use a trick to get a 24 hour Pivot and Support and Resistance Lines.  Here is the formula  used by floor traders.

Pivot point = P = (H + L + C)/3

First area of resistance = R1 = 2P – L
First area of support = S1 = 2P – H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P – (R2 – S1)  and so forth.

Now Support always becomes Resistance and Resistance becomes Support in the markets, so you have minor Support and Resistance in many places on your charts.  The trick is to know which on is the target, so as part of your money management, you should always select a level that offers at least a 3 to 1 win to loss potential..

There are many nuances to using Support and Resistance with other indicators, Fibonacci levels, Ema’s and other indicators.  However, once you master the skill of target shooting, you will be much more profitable.

For a detailed video of how our complete system work with all the indicators, please go to the Futures Trading Room

A simple moving average is the average of a series of closing prices over a set period of time. For example, to determine a 3-day moving average of a commodity, the closing prices for three consecutive days are added together and divided by 3. A 20-day moving average would add the closing prices for 20 days and divide by 20. The “moving” is created by re-adding and re-dividing each day. In recalculating, the earliest closing price is dropped and the newest closing price is added before the figures are averaged. In our example, you are always averaging 3 prices for the three most recent consecutive days; however, those days are progressing in time through the month; therefore, the average is “moving.”

Because they use information that has already taken place, moving averages are “lagging” indicators. They are also “trend following” indicators that are most useful in trending price patterns in which an uptrend or downtrend is firmly entrenched. Moving averages often serve as both support and resistance points.When graphed, horizontal, or “flatline” moving averages have no predictive value.

The most common moving averages, those touted on the financial networks are 20-, 40-, 50-, and 200-day averages. Also effective are 10-, 30- and 100-day averages. Some traders create their own moving averages at intervals that appeal to them: 12, 18, 21, etc. days. Determine the time periods you believe will be most effective and stick with them. As a rule of thumb, limit your charts to no more than 4 or 5 moving averages per chart to avoid confusion.

For more information about Bill McCready’s trading system, visit Futures Trading Secrets.

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.

Discipline. If you cannot maintain self-discipline, if you let emotion rule your decisions, take your money and run before you lose it. Successful futures traders are highly disciplined, consistent and rational. They do not allow themselves to be distracted by extraneous information. They have the ability to dispassionately evaluate their system, knowing when to stick with it and when to change what isn’t working. Futures traders are cool and collected. We are the James Bonds of Wall Street.
Ability to handle loss. If you can’t handle loss, if you are easily frustrated by loss, or if you can’t afford to lose, get out before you gamble away the mortgage money. As a futures trader, particularly in the beginning as you hone your system and skills, you will lose. Successful futures traders are not flustered by loss. They do not panic when they lose. They do not abandon their system at the first sign of loss. In futures trading, the nature of the beast is that sometimes you lose. Futures traders learn from their mistakes, build on the lessons loss teaches, remain confident in the face of loss and work to keep their losses small so that, overall, they win. Futures traders are not defeated by loss. We are the Lance Armstrongs of Wall Street.

Profitable trading system. If you don’t have a trading system that has proven to be consistent and profitable, no amount of ability is going to make you a successful futures trader. You must have an effective conduit for that ability in order to succeed as a futures trader. An effective trading system is essential to your success as a futures trader. Futures traders are only as good as they system. For complete information on my Futures Secrets Trading System, click the link. Read testimonials from satisfied clients, now successful futures traders themselves. Find out how my Futures Secretes Trading System course can teach you how to pull the trigger. Click here for details on Futures Trading Secrets.

Futures traders usually calculate and chart several moving averages of various time variations (5-day, 20-day, etc.) for use as indicators. Short-term moving averages are more sensitive to price change, but early signals may proof to be false. Long-term moving averages respond more slowly, but there is the danger of missing the trend by waiting too long. By comparing short, medium and long-term moving averages, futures traders can spot probable trend changes. The challenge is to determine the combination of time variations that will create that optimum balance that results in reliable indicators.

Watch your moving averages for these signals:

• When a faster average crosses above a slower average, buy.
• When a faster average crosses below a slower average, sell.
• When the daily close is below either moving average, offset long positions.
• When the daily closes is above either moving average, offset short positions.

One important caveat about using published moving averages for information or comparison: You cannot assume that the market will behave today the way it did yesterday!

Visit Futures Trading Secrets for more information on Bill McCready’s trading system.

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.

• Money-making  strategy: To realize a large gain by the end of the day from the accumulation of many small gains.
• Most productive market environment: Wide-channel, heavy-volume, trending or oscillating markets.
• In their trading tool box: 1- and 3-minute moving averages and stochastics charts.

Swing traders. Swing traders are more dispassionate. Fundamentalists at heart, swing traders track price trends and patterns and other quantitative data looking for short-term price momentum. They act quickly to exploit such short-term price movements, looking for gains that can be made in one to four days. Swing traders sometimes mitigate risk by trading in smaller quantities.

• Money-making strategy: To gain from short-term changes in price movements that occur over one to four days.
• Most productive market environment: Tight-channel, light-volume and trending markets.
• In their trading tool box: 13- and 60-minute moving averages and stochastics charts.

Combination traders. Quick reflexes and flexibility characterize combination traders. They are able to gauge the market and respond quickly to the existing environment.

To become a successful futures trader, you have to figure out which trading style suits your personality and talents. If you’re quick on your feet, have the ability to look at the indicators and make snap decisions, and can be satisfied with small wins, you could thrive as a scalper. If you prefer a more measured approach to trading, like to back your decisions up with data, and have the patience to wait for the right moment, swing trading could be your milieu. If you can live in both worlds, you’re a combination trader. Each trading style has its advantages and can be quite profitable. The trick is to figure out in which environment YOU can be most profitable.

The media is quick to focus on the emotional volatility of the populace, and in doing so, often fans the flames of public opinion, increasing emotional panic simply by reporting it. An excellent example is the subprime mortgage disaster in the home loan industry. When first reported with big, black headlines and dire warnings, the reality was that only a small percentage of the total number of mortgages had been made to subprime lenders, and only a tiny percentage of those were actually moving into foreclosure. Initially, most realtors and loan industry officials were not particularly worried and saw what was happening as an uncomfortable but necessary real estate market correction after several years of wildly inflated housing prices.

Widespread media coverage frightened many homeowners, realtors and lenders, leading to all out panic in a fairly short time. The media started issuing dire predictions that the disaster would affect the economy and the market responded. As a broad group, the “people” have always demonstrated a herd mentality. It’s what drives trends. One person acts uniquely, others think he must be on to something important and are quick to follow suit. A trickle turns into a stampede and pretty soon the herd is on the move!

That’s what happened in our subprime example. By constantly increasing its focus on the subprime problem, by continually predicting negative economic repercussions, media attention actually increased public panic, which affected the markets, which impacted the economy, which increased public panic … and so on in a vicious cycle. By dint of its overzealous attention, the media helped the disaster it had forecast become reality.

Futures traders need to look beyond the media hype and dispassionately observe the movement of the market. Don’t allow yourself to get caught up in the emotions of the herd. Trust yourself, trust your system and stick with it.

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.

How are options and futures different? While often confused, there are distinct differences between these two financial instruments. When purchasing an option, the buyer is purchasing the opportunity to buy or sell a futures contract by a certain date. To acquire the option, the buyer pays an up-front fee (called the premium). He can choose not to exercise his option and, therefore, accepts no risk. All risk resides with the writer of the option who is obligated to the sale or purchase if the buyer chooses to exercise his option. With futures, the contract binds both sides equally. Both buyer and seller share the risk and both make a good-faith deposit (called margin) to guarantee that they will meet their financial obligation. The buyer must buy and the seller must sell at the agreed price on the agreed date.

There are two types of futures options:

• Call options: The buyer of a call option buys the right but is not obligated to buy a particular futures contract at a set price at any time before the option expires.
• Put options: The buyer of a put option has the right but is not obligated to sell a particular futures contract at a set price at any time before the option expires.

In trading options on the futures market, futures traders need to be aware of and understand the relationships between:

• the futures contract and the commodity, security or index being traded and
• the relationship between the option and the futures contract.

It is this last point that makes trading in futures options both complicated and volatile. While there is tremendous potential for profit and risk is limited to the up-front cost, traders unfamiliar with options can quickly run amuck. Success is in large part dependent on the trader’s ability to accurately anticipate future price levels, a combination of experience, skill and feeling for the markets.

Making practice trades allows you to:

• Test and fine tune your trading system.
• Learn to successfully pull the trigger.
• Perfect your charting system.
• Develop productive trading habits.
• Practice self discipline.
• See if you have what it takes to be a futures trader.

That last item is very important. You can have the best system in the world but if you don’t believe in yourself, if you don’t believe in your system, if you don’t have the passion to trade, no system in the world will make you a successful futures trader. Like I tell my students, successful futures trading is 90% attitude. Not everyone has the skill, passion, ability or discipline to succeed. Better to find out before you lose your money.

In my Futures Trading Secrets course I recommend that students practice trading on the e-Mini with Sims Broker until they achieve a certain level of confidence and consistency in their trades. Log and study your profits and losses. Look for patterns that indicate when you successfully pulled the trigger and when you failed. Work to increase successful strategies and decrease unsuccessful ones.

Develop successful daily trading habits and routines. Practice the discipline to stick to them even when you don’t feel like it or they don’t seem to be working. Discipline and routine are essential habits of the successful futures trader. Every trader loses sometimes. You have to have the discipline to follow your routine and have faith in your system even when you’re losing if you are to ultimately succeed.

Practicing futures trading on paper is important before you attempt the real thing. Before you start trading with real money, you must develop the discipline to control your emotions and stick to your system. Plunking down cold, hard cash opens the door to greed and fear which can submarine even the best system if not held in check. Practice will give you the skill, confidence and courage to succeed as a futures trader.

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1. Start with your goal. What do you want to accomplish or achieve? What end result are you aiming for? This is your goal.
2. Develop a plan to achieve your goal. You’ll need to factor in the risks, rewards, terms and conditions necessary to achieve that goal.
3. Execute the plan and closely monitor the results.
4. Make incremental changes to your plan until it reliably produces the results you want to achieve.
5. Take your internal temperature. Gauge your emotions. Can you trade these signals and play the probabilities for gain vs loss laid out in your system. You must have confidence in your system and the mental fortitude to play it.

Item 5 is the most crucial and difficult part of developing an effective futures trading system. I tell my students: “If you cannot trade your plan, you will not achieve your goals.”

Read what my students have to say.