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. (more…)

Just as a craftsman keeps his tools sharp, clean and well organized, so must a futures trader keep his “tools” in peak operating condition. A futures trader’s ultimate tools are his mind and his body. Yes, we use systems, triggers, indicators, charts and other tools and tactics — all important. But without the human trigger they are useless. If you do not take care of your physical and mental self and keep yourself in peak trading condition, you will not be able to maintain the level of concentration, stamina, quick reflexes and clear thinking necessary to succeed as a futures trader. (more…)

There are certain psychological characteristics that can negatively impact your ability to succeed as a futures trader. Learn to recognize these behaviors in yourself and guard against them.

• Cheapskate. Many people are foolishly cheap. They are so anxious to start trading on the futures markets that they ignore the necessity of first acquiring the proper education, tools and software to succeed. These people will lose more money in their first round of trades than they would have spent on the tools that would have allowed them to succeed. You can’t be “penny wise but pound foolish,” as my grandmother would say. Don’t nickel and dime your training budget. If you truly want to succeed as a futures trader, spend the money to learn from the best and acquire the best tools available. Click here to hear what my students have to say and learn more about my Futures Trading Secrets Course.
• Impatient. We lived in a society increasingly driven by instant gratification. We don’t want to wait for it or earn it; we want it now! Futures trading is a fast-paced, risk-filled environment that seems to attract people who like to live in the fast lane. These people are so blinded by the dream of instant wealth that they neglect their training, fail to take the time to develop a reliable system, refuse to stick with their system and, as a result, crash and burn. As grandmother would say, “You have to crawl before you walk and walk before you run.” If you want to succeed as a futures trader, slow down and take the time to learn the ropes and develop and practice your system.
• Greedy. Futures trading is not the way to get rich quick, though some seminar organizers use that as a marketing ploy to lure the unwary. Successful futures traders are not  gamblers. You cannot succeed by trading out of greed or desperation; or as my grandmother would say, “A fool and his money are soon parted.” Using emotion as a basis for trading is a quick path to failure. Success futures traders learn all they can, develop their system, work it and stick to it. Success as a futures trader comes from accumulated profits (often small at first), not one big score.
• Overconfident. If you want to succeed as a futures trader, park your ego at the door. Ego distorts rational thinking. The overconfident trader allows emotion to rule his actions. He is so certain that he is right that he will overstay a position to avoid admitting he was wrong. The market is fluid, ever changing. A futures trader must be fluid and able to change position to succeed. You will never be smarter than the market; the market will always win. As grandmother would say, “Pride goeth before the fall,” to which granddad would add, “Don’t bump your nose on the way down”

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You can profit in futures trading when you understand what the spread is and how to make it work for you. An arbitrage technique, the spread is the purchase of one futures contract and the simultaneous sale of a different but related futures contract. The goal of the futures trader is to make money on the change in the price difference between the two contracts. (more…)

Last time we talked about how to evaluate the effectiveness of a futures trading system. But how do you build a solid trading system? Just like anything else:

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.

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Show me the money! In a nutshell that’s the goal of futures trading: to make money. Charts track money. They peel away the rumors and the news reports, the CEO’s prognostications and your neighbor’s hot tip. They show us what master day trader Oliver Velez terms the footprints of money (ref. Tools and Tactics for the Master Day Trader by Oliver Velez and Greg Capra). (more…)

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. (more…)

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. (more…)

When you’re climbing the learning ladder to success (see our last post), that last step is a huge leap! You may find yourself at the conscious competence level for a very long time before everything becomes so practiced and so ingrained that you reach unconscious competence and start trading in the zone as a master trader. Even when you’re in the groove and really working it, it takes time and practice, practice, practice before your routine and technique click to autopilot and using your system becomes automatic and effortless. (more…)