Posted: 5/4/2012 11:26:13 AM EDT
| I'm wanting to start trading futures, and I just wanted to see if you guys have any tips for a beginner. Also what sites do you use to trade on? |
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I'll be starting with $10,000 to $15,000 so not large by any strech of the imagination.
For my trading plan I'm going to have stop losses set up, and try to have all the emotions possible out of my trading ( not sure if thats what you're asking) Right now I'm only looking to do energy, and grain trading. Hopefully branch into other areas if I make money, and get familiar with them. |
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With such a small start I would start with low volatility and low price markets. as low as possible. You run the risk of getting wiped out quickly if you start putting a large portion of your acct into 1 trade.
You need to come up with a full trading plan. You need to figure out under what conditions you are going to buy and how you are going to determine entry price. How many contracts you will buy. Price the stop loss will be set. How you will move a trailing stop. How you will determine your exit price if the trade goes your way. Then you need to have some idea of if this plan will work in trending markets, ranging markets or both. If you get into futures without having a pretty clear cut plan to trade them you will lose. You will get into a trade and you will find yourself in a losing trade refusing to sell, changing your stop because you know it will turn around. Plenty of smart people have lost their entire acct because of this. or You will find yourself in a winning trade with no clear cut way to get out of it and you will wind up giving back those winnings when a pullback becomes instead a trend reversal. You need a plan that cover your method of selection, entry and exit points that brings consistency, and one that determines your money management, how much risk on each trade how many trades to have etc. I strongly recommend you read some books on futures The Futures Game by Teweles (this book gets updated so there are many different versions) is one good one. You will probably have to wade through several before you can figure out which ones are crap. Stay out of gold and silver and S&P and treasury futures until you have a very solid handle on things and a large acct. |
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Also stay in liquid markets. Cuts down on slippage. Overtrading and slippage can easily add up enough to kill a small account because its a much larger percentage of your trade.
Come into My Trading Room is a good book also. Its a realistic walkthrough of how to develop a short/intermediate term trading plan. It touches on futures briefly if I remember but nearly the entire book can be applied to futures. Its full of goodness. |
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Trading futures is a great way to leverage your money and you can start with 10 to 15 k but you will have to severely limit yourself to very specific markets and you are going to have to have a plan that works right out of the gate. Most recommend 25-50k to start and 200k or more to trade index markets. I think 15k will work as long as you are careful and have a very solid money/risk management plan.
For instance a generic plan as outlined in the book i mentioned says to risk no more than 2% of your acct in any one trade and have no more than 6% at risk in all trades combined. Example scenario. There is a $10 stock you want to open a position in. You have 10k in your acct. You figure out that a good stop will be at 9.50 so if you hit that stop you will have lost 0.50 a share. 2% of 10000 is 200 and divide that by .50 then you can buy 400 shares to put you risk at 2% of your total acct on that 1 trade. Now lets say you find and make 2 more purchases similar to the one above, then you have 6% of your total acct at risk. Now you cannot open any more positions until you clear some of the risk you have already opened. Say the first stock rises up to 11, then you could raise your stop from 9.50 up to 10.25 to lock in at least a small profit/ break even more likely. Now you have just 4% at risk on the other 2 open trades because you have removed your risk of loss on the first trade. That is just an example to give you an idea of where you need to be headed in you thinking about managing your money. If you go through the example and try to find how much you can trade in higher priced and high volatility stocks/ futures you will see with a small acct you will be unable to open a position without an extremely tight stop, which is just giving money away especially in futures. This type of money management is critical. You have to have a plan to cut losses at a small percentage of your acct and be able to let gains run high enough to offset your loss, slippage and broker fees. Check your email, i sent you some more info about books. |