The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Nine Trading Resolutions for 2011
01/03/2011 10:50 am EST
What are your resolutions for the coming year? Lose ten pounds? Get your budget under control? While many of these types of resolutions fall by the wayside by March 1, I’d like to share some long-term trading resolutions based on my many years of experience with futures traders like you. These aren’t one-time pledges, but good trading practices for you to follow throughout the year. And if you stick with them, I think you’ll emerge an even better trader.
1. Establish Realistic Goals and Tailor Your Trading Plan Accordingly
You’ve heard this one a million times: Plan your trades and trade your plan. But, there’s a good reason why this phrase has become cliché. Developing a trading plan helps you to remove emotion from your decision-making process. And, the emotions of fear and greed are always in the wings once you have money on the line. Having your own personal plan allows you to determine if subsequent setbacks are either a failure to remain disciplined, or problems with the plan itself that indicate an adjustment to the plan is due. Accordingly, any successes can be similarly assigned to either adherence to your plan or dumb luck.
2. Know When to Exit a Trade
Know the objectives for your trade going into it, but always have a bailout plan and place a protective stop order whenever possible given exchanges’ order acceptance policies and market liquidity. Ask yourself, “At what point do I absolutely not want this position anymore?” Call that your “doomsday stop” and get it working. If such a stop does get hit, then something is probably very wrong with your trade. Remember, stops do not guarantee against losses—markets can sometimes move quickly through them. Also, remember that stop orders can remain unfilled, as in limit moves. Picking a place to bail out of a trade is a powerful first step toward taking control of your trading.
3. Limit the Number of Markets You Trade
Don’t spread yourself too thin by trying to follow too many markets. Most traders have their hands full keeping abreast of just a few different markets.
4. Trade Markets You Can Afford
Always check the volatility and daily ranges of a market to be sure that they fit your trading criteria. Don’t make the beginner’s mistake of devoting all the money in your account to margin requirements for open positions. Drawdowns are inevitable, so you should avoid placing yourself in a position where a series of bad trades can wipe you out or negate your ability to recover.
5. Test Drive Your Strategies
Use a simulated trading account to test drive your strategies before implementing them in real markets with real money. You might discover some flaws that can be easily remedied.
6. See the Forest, Not the Trees
Don’t get so wrapped up in market action that you lose your trading perspective. Many traders get thrown by fast markets or whipsaws that, in retrospect, were nothing but an intraday blip.
7. Keep Accurate Trade Records
Losing track of which trades you have open and their current profit/loss status generally means losing money. Pay attention to your open trades. Write down each trade you make, the date it was placed, and the price at which you bought or sold. Then, check in at least daily on its profit/loss status.
8. Avoid Answering Margin Calls
If you receive a margin call, it’s probably because you’ve stayed with a trade too long. Don’t exaggerate the situation by sending in more funds. Consider a margin call as a wake-up that you might be emotionally attached to a trade. Instead, cut losses early and often, and avoid answering a margin call.
9. Ask for Help as You Need it
Futures trading is not easy, and the “tuition” you pay in commissions and slippage can be substantial. Educate yourself as much as you can by using the resources available, such as the Lind-Waldock Web site at www.lind-waldock.com. But, don’t be afraid to ask for help. Establish a one-on-one relationship with a good futures broker if you need some guidance.
By Jim Gombas, director, Lind Plus
Jim Gombas is director of Lind Plus, which specializes in personal relationship brokering and services broker-assisted clients exclusively. Futures trading involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.
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