Futures Trading
Day Trading, Swing Trading, and Long Term Trading
Futures trading involve a plan, and the knowledge of the factors that a person needs to succeed, or it is just a matter of time before you will lose your money. Futures are highly leveraged trading vehicles, like a car if you go too fast or lose control, you will crash. Let us strap on our seat belts and begin.
When I have a thought, idea, and time frame for a market that I want to speculate and make a trade in, I formulate a plan based on those three things. First issue is how much money (%) I want to commit to this trade, even if it involves day trading with a per day loss cut off. Now I consider the risk and reward from the best strategy derived from my thoughts, idea, and time frame. Discipline to execute your plan is needed for success.
I would suggest using common sense and logic, it will help you stay grounded and out of trouble.
The Day Trader:
This is the type of trading that has many different ways to approach with many variables and infinite possibilities. I have traded with “legends” on the trade floor and all types of traders and characters, but that is another story.
Starting with the local floor traders who are a scalper and the person trading from a computer, both looking to make a tick or two on a trade. The difference is the local floor trader (Local) has a better chance to buy the bid or sell at the offer (their edge) and the market remain at the same bid and offer, hence making a tick and the market has not moved. This is much harder to do and certainly not as often on a screen. Some locals even trade on the screen and in the pit at the same time too. Same advantage for the local who is a spreader and legs a trade on. Both local and screen trader usually must hold their trade for a short time to make or lose money depending on how many ticks you risk and how many to take a profit. All trading must deal with the issue of time. Managing time to stay in a trade for you to take a profit before reaching a stop loss that keeps you from losing more money than you were going to profit if right. The scalper has less issue with this because he is trading with little time right or wrong, and he has more of a technical or intuitive approach. This type of trading involves many trades per day and again the edge goes to the floor trader or member trading from a screen because of the cost of commissions and fees.
Next is the swing day trader. He needs to manage time more and is looking to risk more to make more with the extra time. Again a technical and or intuitive way to trade because fundamentals do not change in a given day but many things move the markets in a day such as a report, a statement, breaking news, or even a change in a weather forecast. This trader must have a solid plan, strategy, and the discipline to execute that plan without waiver.
The last type of day trader might not take a trade on a given day because he has more criteria for price, or intraday trend to occur before initiating a trade. Usually a technical trader who waits for a price to buy or sell with the least amount of risk and the most reward if right.
When I approach day trading as noted above, I also try to trade on the side of the trend when I initiate my trades, if the short and long term trend is the same.
The Swing Trader:
This type of trader might hold a position for 1 day to a few weeks. Time and money management is now an issue. This is where strategy is important because strategy must manage time. The time needed to confirm if your trade will profit or not. Wrong strategy to get stopped out at a price for whatever reason including having too many contracts, losing the % acceptable for that trade. With the right strategy you would have more time to confirm if the trade will not work because the price is now farther away and thus buys you more time.
When I swing trade I like to be on the side of the trend and have the patience to wait for the proper entry with the least amount of risk and the most reward. Many times I will not get my entry and would have made money, but in the long run with the extra risk of a worse entry price, it will cost you money when you could have waited and the market goes to the price you were supposed to have waited for. Discipline. When I do miss a trade and now it goes to my objective to take a profit on the same day or any day to follow, I look at doing the opposite for a day trade.
The Long Term trader:
This type of trading usually concerns itself with the fundamentals and just uses the technicals for when they want to enter or exit the trade. Of course you can technically trade the long term and as useful as in day or swing trading.
Take all of the above and add the managing of time factor to the highest level. How many times I see clear trends are forming and markets may take a long time to catch up to the facts and unfold with the correct price move. People often get the right direction in time, but their strategy and money management does not allow them the time needed for the fundamental reality to unfold and profit from. Hard to stay in a position with no money left in your account.
If you Day, Swing, or Long Term Trade:
Before you begin, have money management for the worst case scenario and not lose more than 10% on a trade, have a plan, a strategy based on your plan, discipline to execute, and do what works until it does not any longer. Be an observer and look for changes that improve what you are doing and make change. If you want to be intuitive, keep a journal to keep record if you made or lost money by not following your strategy. You are human and you will think you did better than what you probably did. A journal is a great way to keep it real. This is your own words telling yourself what your thoughts were when you refer back. Write down everything you did right and wrong, hopefully no matter if you made or lost money that day, you can say you followed your strategy and if not, why? Did your intuitiveness paid off? As long as you keep a journal you will know. Change whenever you know from your notes an improvement can be made. NEXT
|
|
