As we enter a new year, I find these words from the Daily Motivator of particular import to my life as a futures trader. More than anything else, your daily attitude affects your ability to perform successfully as a futures trader. If you stay positively focused, you will be able to assess your position will confidence and pull the trigger at the precise moment to ensure maximum profitability. Allow negativity or self-doubt to eat away at your confidence and you will fail.

Everyone has the occasional bad day. But whether it’s a trading loss or a crisis in your personal life, you can’t let feelings of negativity engulf you. You have to “shake it off,” “get back on the horse, “get back in the game.” Hackneyed though the sayings may be, they carry a large truth. The only way to succeed is to refuse to allow yourself to be beaten down. You have to maintain faith in yourself and confidence in your ability to succeed. You have to stay positive.

There are many ways to renew your positive energy each day. I enjoy a brisk walk or run in the early morning. The exercise recharges my physical batteries and participating in the beginning of a fresh, new day revitalizes my spirit. Exercise, daily motivations and personal affirmations are all ways to recharge your positive energy before you tackle a new trading day. Experiment, discover the activities that keep you positively motivated, and make them a daily part of your life. The more positive energy you can maintain in your life, the better trader you’ll be.

Ralph Marston ends his December 22, 2007 Daily Motivator with a thought I’d like to pass along to all of you:

“Whether it’s through your actions or through your attitude, there’s always a way to introduce a more affirmative perspective into your life. Stay focused on the positive possibilities and life will continue to grow more richly rewarding.”

My best wishes for a brighter, happier, more profitable 2008!

Visit us at Futures Trading Secrets.

What do we mean when we say, pulling the trigger? It’s trader talk for act. It’s the ability to put into action what your indicators are telling you, all you’ve learned about trading, and what you know from studying the market. The tremendous preparation that goes into becoming a successful futures trader is all for naught if you can’t act. Futures trading is all about pulling the trigger. If you don’t play, you can’t win. And futures traders play to win!

The savvy futures trader knows when to pull the trigger. Acting precipitously won’t get you anywhere. You pull the trigger when your chart indicators hit — generally based on the one or three-minute stochastics. When you pull the trigger, there are three ways to time your entry, or aim the bullet. The timing you choose has a lot to do with your risk tolerance.

• Early entry involves some wiggle. You balance the risk of the wiggle against greater potential gains. You want to time an early entry as close as possible to an exhaustion point and just ahead of a reversal. Since you’ll be going against the crowd at the start, expect an early entry to move away from you initially. You can mitigate the risk of an early entry with smaller trades. Early entry generally gives you the greatest possibility for gain.
• Enter in a positive position right at the moment of greatest impact and you’ve hit the sweet spot. The window for this entry is exceedingly small so you have to be on your toes to catch an entry at the sweet spot.
• Late entry carries the greatest risk. Made at exhaustion levels, a late entry can reverse fast and is for those searching for extended leandowns to make a last-ditch push. However, a critical make or break scenario can trigger a profitable late entry. As a rule of thumb, you should limit late entries. Late entries come nearly at the point of reversal. When you enter late, you gamble that the reversal will come later rather than sooner — a risky venture.

There are critical charting indicators that can be used to find the most lucrative entry point and tell you when to profitably pull the trigger. In my Futures Secrets Trading System course, I show you how to set up your system, develop your charts and recognize the indicators that tell you when to most profitably make your entry. I show you everything you need to know so that you can pull the trigger with confidence.

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 many potential futures traders out there who spend hours creating and pouring over their charts. They hone their system to perfection. On paper and on sims programs they excel. But ask them to put their money where their mouth is and they just can’t do it. Real futures traders don’t exist on paper and they don’t own the market on sims. Real futures traders take their guts in their hands, plunk down their money and find out what they’re made of in the real world. They may fail more often than they succeed at first, but those very real, money-losing failures will teach them more than a lifetime of sims successes. You are not a futures trader if you can’t pull the trigger in the real world.

Now don’t get me wrong. In my Futures Secrets Trading System course, I emphasize the importance of charts. I teach you how to interpret charts and use that knowledge to trade successfully. I teach you how to develop and hone a futures trading system that works in the real world. I encourage the use of sims trading programs to practice and hone your skills before you try trading in the real world. To become a futures trader, you do have to learn a specific set of skills and take the time to practice those skills. But you also have to have the courage to take the next step — to pull the trigger.
It’s like learning to drive a car. You spend time in the classroom and in the simulator, but eventually you have to get behind the wheel of a real car, turn the key, step on the gas, and take that baby out for a spin on the highway. Preparation and practice can keep you from crashing, and you’re bound to pick up a few dents and scratches along the way, but with time and experience, you’re soon cruising confidently down the highway.

That’s the significant advantage of my Futures Secrets Trading System. I give you the tools and the confidence to take your system out for a spin in the real world. I teach you not only what to do, when to do it and why, but I give you the confidence to take that giant step from mental preparation to physical action. I teach you the single most valuable skill a futures trader can have — how to pull the trigger.

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 Secrets Trading System course can teach you how to pull the trigger. Click here to order today.

There are other charting techniques that provide futures traders with more information than candlesticks. Their allure lies in their ability to visually show traders which way the market is trending — bull or bear — and which way it is about to trend. Knowing which group controls the market — and, more importantly, which group is about to control the market — gives futures traders a significant trading advantage. Successful futures traders consistently trade with the market trend. Basically, in a bull market, you want to buy. You sell in a bear market. Knowing which way the market is going to trend allows you to enter and exit the market at the front of the pack where the profits are greatest.

The strictly vertical Japanese candlestick is simply easier to interpret at a glance than the armed column of the Western bar chart. Candlesticks emphasize the relationship between the opening and closing prices with a cylindrical body, called the real body. The top and bottom of the cylinder represent the open and close with the two wicks –one extending from the top, one from the bottom of the cylinder — indicating the extreme high and low prices of the period. It is the range between the opening and closing prices more than the prices themselves that tells a trader whether the bears or bulls are in control of the market. Candlestick charts make this instantly obvious.

The color of the cylinder also provides futures traders with immediate information about market movement. When the bulls are leading the market, the real body (cylinder) will be white. White is a light color, so think of it as also being light in weight, of rising upward. Therefore, any white or light-colored candlestick represents an uptrending, or bull, market that favors buyers. Conversely, when the bears lead the market, the real body will be black. Think of black as a dark, heavy, sinking color. Black or dark colored candlesticks represent a downtrending, or bear, market that favors sellers. A candlestick that looks like a Western bar with no real body, indicates a market that opened and closed at the same price. In other words, the bulls and bears fought to a tie.

What is the risk/reward ratio? The concept is fairly simple, though the execution is more complex. For each trade you compare the amount of risk to the potential amount of reward. In other words, what is the downside risk compared to the upside profit potential?

If the risk outweighs the potential profit, DON’T make the trade.
If the potential profit outweighs the risk, DO make the trade.

When futures traders are at work, they are constantly evaluating each tick of the market in terms of the risk/reward ratio. They are looking for trades that will give them the least risk while gaining the most profit. The risk/reward ratio can help a trader determine which of several possible trading actions will potentially be most profitable. The concept is fairly simple, so how hard can it be to execute? Much harder than you think!

Using the risk/reward ratio. The problem many futures traders have in utilizing the risk/reward ratio is that market movement and the actual risk or reward value of any trade can never be objectively or precisely pre-determined. No one can know what will actually happen in the future, whether that future be a minute from now, an hour from now, tomorrow or next week. A futures trader is limited to technical analysis and common sense. Based on previous market action and previous trading experience, he can predict what might happen, but the actuality must await the event.

Savvy futures traders watch technical support and resistance levels to help determine risk/reward ratios before entering a trading position. It is human nature to follow the pack, to buy on an upturn and sell on a downturn. Savvy traders have learned to watch the small changes in support and resistance levels to time their trades to minimize risk and maximize profit. Selling into a rally has greater potential profit than buying with the pack. If you sell into strength, you are guaranteed plenty of buyers eager to purchase what you’re selling. If you buy into a rally, the rally will eventually peter out and you’ll be caught chasing the trend downward, losing money at every tick. Smart traders have already taken their position before the market starts to run upwards. Even if you do not sell at the peak of the run, you will have made a profit. Novice traders often get greedy when they are in this position. It is possible to wait too long to sell and get caught when the market corrects and heads down again. Remember: You’ll never go broke making a profit, even a small one. Small profits add up.

Likewise, the time to buy is often when the market takes a small dip. Buy on a pullback to give yourself a better entry point and higher profit when the stock rallies again. Though it goes against the norm, often your best risk/reward ratio can be realized by doing the opposite of what the pack is doing.

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.