4 Things To Know Before You Trade Futures

Trading futures can be a very rewarding activity, but just like the stock market it carries some big risks and demands a lot of your attention if you want to succeed.   Predicting future prices can be even less predictable than predicting the rise and fall of stock values, so if you want to enter this market you need to be careful.  Technology has done a lot to change how the futures market works, but the following advice is just as relevant today as it ever was.

1. Plan Everything

Once you enter the futures market, the situation can change in the time it takes to go to the bathroom.  However, if you react to things the instant they happen you’ll make a lot of mistakes and end up letting the crowd drag you along.  That’s no way to make a profit in futures, so take some time before the market opens or before you buy anything to plan out what you’ll do if the market shifts.  What if the value drops?  What if it goes up?  Planning ahead will keep your emotions from making your decisions.

2. Always Use A Stop Loss

When the value of a future keeps going down, you should always set a point to bail out automatically.  While you’re in the moment, it’s too easy to get caught up in the changing numbers and hope that a dropping number will soon recover.  Setting an automatic stop-loss order will get you out of a bad situation, and while you may regret it when a future recovers, you’ll usually come out on top by using an automatic system.

3. Keep Your Eye On The Ball

Whether you’re trading futures, trading stocks, or investing directly in companies, it’s always important to make the most of every opportunity.  However, while that means looking for new opportunities, it also means keeping your attention on the opportunities you’ve already invested in.   When you’re trading futures, you need to pay attention to market changes, industry announcements, and weather reports.  For most traders six to eight markets is a full-time job, so don’t spread yourself too thin.

4. Stay Patient

The value of futures can go change instantly while trading is open, and it’s all too easy to get caught up in the day-trade market with its constant buying and selling.   However, if you want to make a solid profit you need to focus on long-term values and goals.   A few dips here and there won’t make a big difference if the future value eventually hits the number you want, but they’ll make a big difference if you let them scare you into trading early.

There are plenty of other skills you need as a futures trader, so keep researching both the futures market and the kind of attitude it takes to succeed.  Just like stocks, trading futures isn’t for everyone, and there are going to be times you make a mistake and lose money.  However, if you stick with it, if you learn how the markets and the climate works, you can make a lot of money on futures.