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:
- 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.
- 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.
- 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.
