Futures Trading Plan

Futures Trading Plan – Planning For Success

Any great endeavor starts with a great plan. What would the Eiffel Tower look like if there were no plans? Or if the builder of your new house wanted to just “figure it out as I go” would you allow him to build? Great successes are born from great planning and this is true in the futures market when your trading rules create a successful futures trading plan.

What is a Futures Trading Plan?
A futures trading plan is similar to a stock trading plan; both represent your set of “terms and conditions” for making trades. By establishing your futures trading plan before you enter the market, you can establish rules void of the emotions that will grab you in the heat of the moment. Why is this important? Whether things are going well or poorly, there is a tendency for people to react emotionally. Emotions are a great thing normally, but a poor guide when you are making major money decisions with your investments.

Some things you might want to include in your futures trading plan are:

  • A Beginning Amount to Start – This is important not only from an investment prospective but from a personal one as well. It is important to understand that there is a direct relationship between the amount of capital invested and the probability of successful trading. Professionals recommend starting your investing with a minimum of $10,000; starting with less may leave you vulnerable to greater risk since you can’t apply proper risk management principles. Starting with less than this will put you at a disadvantage but you can overcome it with a conservative approach. Remember the story of Richard Dennis; he isn’t the typical investor but he built a $200 million fortune from just $1,600.
  • Counting the Cost – Your initial investment shouldn’t only be considered the amount you are willing to invest but the amount you are able to lose. This is the reason it is called “risk capital”. Risk capital is defined as money you can afford to lose without affecting your standard of living. It should also be money that you feel comfortable risking. Think of your commodity account as an investment in a business. Many businesses fail; that’s life. If you aren’t afraid of losing your money you are more likely to make correct trading decisions.
  • Being in the Trenches – Every investor needs to map out a strategy in their futures trading plan for the actual buying and selling decisions. Some people are very disciplined and able to remember the general principles of defensive investing while others need a plan for every scenario possible. Be honest with yourself and evaluate your tendencies. This is not some indictment on your character; this is your only opportunity to protect you investment, so be thorough and honest when you trade futures.
  • Stop Loss Plans – No one wants to think about “what if” they lose. Everyone wants to win every time, but in a futures trading plan, this becomes part of a stop loss strategy. There are defensive techniques for not only recognizing when to get out of a buy but also how you should do it. Without solid charting and analysis, it is impossible to determine whether a downtrend is temporary or devastating.
  • Technical analysis – This is the backbone of any futures trading plan. Through charting and research, an investor has the best view of which direction a commodity is heading and why. Committing to a trading system like Japanese Candlesticks is invaluable to accomplishing your technical analysis due to its powerful charting principles.

Principles to Live By
There are four central precepts for every futures trading plan; these principles should be written at the top of your futures trading plan and posted next to your computer. These principles are:

  1. Trade with the trend
  2. Cut losses short
  3. Let profits run
  4. Manage risk

These rules outline everything that is important in a futures trading plan and everything else that you include must recognize these for principles. By establishing your futures trading plan you are able to learn the ideas of successful and profitable investing in the futures markets.

 

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Trade Futures

It has been said that success in this life is made up of equal parts of learning and yearning. For nearly everyone, it’s possible to accomplish your goals if you have sufficient desire and education. If your desire is to trade futures, you already have a direction; next, you need to couple a relentless pursuit of education with a strong desire to succeed at something very interesting and potentially rewarding. Commodity trading can be complex and frustrating but it is also well worth the effort.

Necessary Traits to Trade Futures
What are the four things necessary to trade futures? They are:

  1. You Need to Have the Desire to Succeed As a Trader – There is a certain air that is needed to trade futures…part student, part bulldog, part daredevil. Desire to succeed will push you to learn more and trade futures smarter.
  2. Persistence and Motivation – This is a by-product of your desire. Once you have the desire to succeed, you will be willing to put in the time to learn to trade futures and the motivation to make your new business a success.
  3. Discipline, Discipline, Discipline – Discipline to learn the nuances of how to trade futures, discipline to do technical analysis, and the discipline to make smart futures trades. If you trade futures like it is a business you will acquire the discipline to be successful.
  4. Someone to Help You Get Started – Whether you learn from someone you know, from going to seminars, or reading books, you will need some help when you start to trade futures. It is important to learn the terminology, techniques and practices that make a successful trader and that knowledge is best passed down from person to person.

An Overview of Futures Trading
Futures trading is different than investing in the stock market or bonds since you don’t actually own anything; in futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.

The Potential of Futures Trading
Trading futures is an excellent way to make money. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. Futures trading has a bad reputation as being filled with risk and while there is risk, the truth is that futures trading is only as risky as a trader makes it. This is not the lottery or a trip to the casino; if you take a conservative approach, look for a reasonable return and make this a business then the probability of success in commodity trading is very good.

Some of the better known futures markets are:

  • Agriculture – This is a broad, commonly traded futures which includes such things as wheat, soybean and corn futures.
  • Currency Trading – Currency trading, also known as FOREX (foreign exchange) trading, this involves buying and selling currency from many different countries such as the US dollar, the British pound and the Japanese yen.
  • Interest Rate Futures – This market focuses on financial transactions, interest rates and bonds.
  • Energy Futures – This market centers its attention on gas and oil futures.
  • Foods – This sector includes items such as coffee, sugar and orange juice.
  • Metals – This is one of the more popular and better known sectors. The typical commodities in metals are gold and silver.

Trade Anywhere
Since market data can be delivered easily via the Internet, you are free from any geographic restrictions, allowing you to implement trades from almost any location in the world.
One of the real advantages when you trade futures is that you can literally do it anywhere.
Getting Started
In order to get started, you need to equip yourself with a good understanding of how to trade futures, which markets you will target, and above all, you need a trading plan. The trading rules in your plan will help you to understanding yourself and your responses to the things you see on the charts. You need an unemotional approach, backed up by the confidence that you can do it. This confidence comes from proving to yourself that you can win more often than you lose when you trade futures. Paper trading futures is a good place to start.

 

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Futures Markets

When formulating a trading plan for futures, it is important to think about the futures markets where you trade. There are a number of futures markets with adequate liquidity for speculation, but when choosing a market it is important to choose based on your account size, level of risk and investment philosophy. Above all it is important to be diversified; each market has its big move every year. Diversification helps increase your chances of catching those big moves that make for successful trading.

Other Factors in Choosing Markets
Another key to choosing your futures markets is history. Futures markets that have more big trending moves are more likely to have them in the future as well. The following list represents some of the best trending futures markets:

  • Currencies – Currency trading is the sector that trends the best. 
  • Interest Rate Futures – T-Bonds represent long-term interest rates and Eurodollars are for short-term interest rates. 
  • Energy Futures – Natural gas, heating oil and crude oil futures all make for good trades. 
  • Food Sector – Coffee, orange juice and sugar are the recommended commodities. 
  • Metals – Gold, silver and copper are traditionally strong commodities. 
  • Agricultural – Cotton, soybeans, oats and corn futures outperform the others

Now you have a short list of commodities that have a history of trending well. The next step is to solidify your trading rules when futures trading.

These rules should include:

  1. Reviewing – This is a critical part of the process. You wouldn’t jump out of an airplane with a parachute that wasn’t inspected prior to being strapped to your back; the same principle is true with your trading plan. 
  2. Strict Guidelines – Your trading plan must be specific and precise. Having a tested, reliable trading plan will give you something solid when you hit a losing period.
  3. Testing – Thanks to the computer age, you can successfully test your trading plan through paper trading futures. Without this ability, your trading plan is left to chance. Does it work or fail? Testing will give you the confidence you need to be a successful trader.


The final step is to go live with your new wisdom. You’ve identified your target markets, formulated, reviewed and tested your trading plan; now is the time to put your hard work to use. The futures markets have something in common with the stock market; a well-informed, patient investor is more likely to succeed than someone just stabbing in the dark.

Is there anything else you can do to increase your chances of success in the futures markets? Yes, there is. Implementing a trading system like Japanese Candlesticks Patterns adds a powerful charting system, especially in the futures markets. Candlesticks was invented over 300 years ago as a method for trading in the rice markets of ancient Japan . The success of the system has grown and developed and it is an amazing tool for today’s futures markets. With the candlestick charting abilities you will gain you could literally have a view inside the directions of futures before they even move. Added to your trading plan, Candlesticks can put you in the right company for successful trading in the futures markets.

 

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April 15 Daily Market Comments

The hanging man signal in the Dow on Friday provided a directional format based upon how the market opened this morning. Obviously, the weaker open confirm the hanging man signal, making a pullback to the T-line a likely prospect. It will be important to see how the market closes Monday. It needs to stay above the T-line but it also needs to close back near the top end of the trading range to indicate Monday’s trading was merely profit-taking.

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Paper Trading Futures

Getting Your Thoughts Down on Paper…

Don’t you love just throwing away money? Oh, not one of your favorite things? Well, most people feel the same way so jumping into something like futures trading is pretty scary. The good news is that you can learn by throwing away some virtual money and not the real stuff with something called paper trading futures. Thanks to the wonderful world of the Internet, paper trading futures is an easy, free way to simulate futures trading without the financial risk. Before we go deeper into paper trading futures, let’s talk about futures trading in general.

Futures trading is different from investing in the stock market or bonds since you don’t actually own anything; in futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money. (Notice the words “pay the losses”. When paper trading futures, you can ignore those nasty words!)

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.

The Potential of Futures Trading
Trading futures is an excellent way to make money. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. Futures trading has a bad reputation as being filled with risk and while there is risk; the truth is that futures trading is only as risky as a trader makes it. This is not the lottery or a trip to the casino; if you take a conservative approach, look for a reasonable return and make this a business then the probability of success in commodity trading is very good. The downside of paper trading futures is that even if you amass a $200 million fortune, you can’t collect it. Remember we’re just learning while paper trading futures…you can spend real money when you open a commodities account!

Getting Started Paper Trading Futures
There are a large number of companies on the Internet that offer free paper trading; a simple Google search will give you more choices that you can imagine. These companies offer this service in hopes that after you get comfortable paper trading futures, you will open a commodity account with them. In the meantime, once you have registered simply follow the directions of the commodity trading software and you are ready to begin.

What You Might Notice
If you put the cart before the horse and try to implement positions before you understand futures trading, you will be in for a surprise. The language of futures trading is different; there is terminology you need to learn, strategies that you won’t understand and even the trading software will probably be confusing. So before you try to begin commodities trading, go back to school and learn the terms, learn the techniques and learn the software where you are paper trading futures.

Is Paper Trading Futures Important?
In and of itself, paper trading futures is not important; it is merely a simulation of the things required to trade futures in the real world. What is important while paper trading futures is the approach you take; if you treat this like a game or don’t understand the importance of learning futures trading, you should seriously reconsider attempting to trade futures. This is a skill and the consequence is losing your money so don’t take paper trading futures lightly.

Conclusion
It is difficult to find another business opportunity where you can practice and learn for free. Take advantage of this unique opportunity and start paper trading futures today.

 

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Futures Trading

They say a journey of a thousand miles begins with the first step. This is true of futures trading as well. Even if you have investment experience you might not know the difference between stock trading and futures trading. Don’t get worried because that is the reason for this discussion. What is going to happen is that we will look at futures trading for beginners and give you some of the basics to get you started. If you have never been exposed to futures trading, that is okay. The journey may be a thousand miles but we will take the first step together.

What Are Futures?
Futures trading is different from investing in the stock market or bonds since you don’t actually own anything. In futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is different for beginners in futures trading; it is like a bet on the future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.
What Is The Potential of Futures Trading?

Trading futures has the potential to be an incredible profit maker. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. While his results are truly extraordinary, not everyone can expect the level of successful trading he achieved, there is good news for every investor; you can make money in futures trading. You may only be a beginner trading futures, but you are savvy enough to recognize the potential in futures trading.
What Are Futures Markets?

The beginner in futures trading needs to understand that futures are not trading on the stock market. Some of the locations are well known like the Chicago Board of Trade, the New York Mercantile, the New York Cotton Exchange and the Chicago Mercantile Exchange. Some of the better known futures markets are:

  • Agriculture – This is a broad, commonly traded futures which includes such things as wheat, soybean and corn futures.
  • Currency Trading – Currency trading, also known as FOREX (foreign exchange) trading, involves buying and selling currency from many different countries such as the US dollar, the British pound and the Japanese yen.
  • Interest Rate Futures – This market focuses on financial transactions, interest rates and bonds.
  • Energy Futures – This market centers its attention on gas and oil futures.
  • Foods – This sector includes items such as coffee, sugar and orange juice.
  • Metals – This is one of the more popular and better known sectors. The typical commodities in metals are gold and silver.

What Do You Need To Do To Get Started?
There are several things you need to do as a beginner in futures trading:

  1. Start Learning – There is no substitute for education. Read books about futures trading, talk with others that trade futures and search the Internet for information about futures trading. Once you start investing your own money, you will be glad to understand futures trading.
  2. Create a Commodities Trading Plan – This is crucial. You need to outline your goals and objectives as well as your strategies in an unemotional manner. This way, when greed and fear interferes with your decision making process, you will have already decided your course of action.
  3. Select a Broker – This is a personal, but important part of the process. You can implement your own trades but you need someone to actually place the orders. Some full-service brokers offer more services and most Internet brokers offer lower commissions. Even though you’re a beginner in futures trading, define what you want from your broker and find someone who meets your needs.
  4. Use Japanese Candlesticks – This powerful commodity trading and charting system will help not only the beginner in futures trading but is valuable to the “expert” as well. Candlestick patterns  such as the doji, bearish engulfing, and the hanging man, will help you to find the trends in the market that most others miss.

Conclusion

Futures trading for beginners is nothing more than learning, defining your processes and sticking to your trading plan. This journey is no longer a thousand miles for you. You have already taken the first step so keep moving towards your goal!

 

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