2 Excellent Trading Rules

03/10/2015 6:00 am EST

Focus: STRATEGIES

Michael Seery of SeeryFutures.com highlights two trading rules he feels are extremely important; not risking too much money on any one particular trade and trading with the short-term trend unless the market is in a consolidation.

1. If you follow this rule you will have a chance of being successful over the course of time, if you don’t follow this rule you will be sure to lose your money quickly. This rule is simple. Do not overtrade ever, for this is an easy way to lose all your capital quickly.

My definition of overtrading is risking too much money on any given trade, for example if you are trading a $100,000 dollar account and you place a gold trade Sunday, you should limit your loses to 2% of the account value, which, in this case, is $2,000, which allows you to be wrong on many trades and still be around to play another day. In futures and option trading you will have losing trades—that is for certain—so make sure you manage those losses and move on to another trade.

2. Trade with the short-term trend, as the saying goes, in futures trading, the trend is your friend, but sometimes you will be in a market that is trending higher and then has a false breakout to the upside and then suddenly sells off causing you a 2% loss on your equity and you say to yourself that was a bad trade and should I do something different on my next trade. If it was up to me, I would continue to buy strength and sell weakness because commodity trading is about percentages of success in the long run and if you go with the path of least resistance more often than not, you will have the probabilities of success on your side.

I define a trend as a commodity hitting a 20-day high or low in a trendy market, if the market is in a consolidation, stay away from it and find something that is trending up or down and go in that direction remembering the money management rules of 2% maximum loss if you are wrong.

By Michael Seery of SeeryFutures.com

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