Selecting a futures trading broker is one of the most crucial decisions you’ll make for your commodity futures and options trading account. Whether you’re a broker assister, online trader, employing automated systems, in managed futures or newsletters, you wish a brokerage company which can provide the best service your trading requirements while offering excellent value for your trading dollar.
Following are some tips to help new future traders get started.
Determine your goals
Making actionable goals as new future traders will guide lay the foundation for what you plan to accomplish. That may look easy – “I want to be profitable. However, including some added specifics will offer a perspective and framework to help guide your trading.
For instance, goals based on different timelines:
· Weekly – What’s your profit loss or goal limit per week?
· Trading Day – What’s your profit loss and limit per day?
· Per Trade – What’s your profit loss or goal per trade?
Determining such perspectives which resonate most with you can be advantageous to help track and gauge your continuous performance.
Research your strategy
Futures contracts are priced to foresee the future value of a commodity or index. Utilizing technical analysis, you can discover a series of approaches to benefit from both downward or upward moving contract prices. Strategies could be designed based on both sophisticated and basic market movement premises.
Utilize indicators
Technical indicators can be integrated into futures trading strategies to offer further insight. That includes potential sell and buy levels based on historical price action within the market. For instance, Bollinger Bands play as a technical indicator of oversold and overbought market conditions. When searching at Bollinger Bands on a futures chart, a twenty-one days are moving average surrounded by a lower and upper band, signal oversold or overbought market conditions.
Identify your risk threshold
As a new trader, determining the level of risk you’re at ease with is a crucial component of the trading foundation. Knowing that threshold will enable you to organize both losses and gains more efficiently. Apart from your risk tolerance, this definition must also cover an understanding of how much capital is required to continue trading after a loss.
Several things to keep in mind include:
· What amount of your initial investment are you happy losing?
· What percentage are you comfortable losing daily? Weekly? Monthly?
· How much margin is needed to include a futures position? Consider margin as the minimum amount of capital required by a futures broker to participate in a futures position.
· How volatile is a futures contract?
Have an exit plan at hand
Whenever considering exit plans, be sure to consider both scenarios:
· Exiting an unprofitable trade
· Exiting a profitable trade
One exit plan which could be advantageous for both exiting unprofitable and profitable trades is a trailing stop order. You see, a trailing stop order follows the current prices of the futures contract by the number of capital decided on by the trader. It performs when the contract raises or reduces by an amount greater or less than the current price of the futures contract.
As mentioned earlier, bear in mind past performance isn’t indicative of future outcomes. You must always trade within your risk tolerance levels.
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