On the rugby field, if a teammate makes an error, such as “losing the ball forward,” we tell him immediately after “bad luck, next job.” It reminds him to clear his mind of the error and to ready himself for the next potential play. By increasing his awareness, he may be in a better position and better focused to make that next play. After all, it would be foolish to dwell on the mistake during a match, potentially leading to additional errors.
The same could be said of a trader that was stopped out of a position for a loss just before the market reverses, heading back in the intended direction, “Bad luck, next job.” Clear your mind of the last trade and prepare for the next opportunity, whether it is a day trade to be executed in the following minutes or a position trade to be executed the following day. Although luck may have had less to do with being stopped out of a position; perhaps the stop loss was too tight, support or resistance levels may have been miscalculated, or there was not enough open interest at certain price levels. It would be foolish to dwell on the trade leading to immediate poor trading decisions. A “knee-jerk” reaction may be to re-enter the market, but ask yourself, “At the current price level, would I initiate a new position, long or short?”
After the match, the player can review the game film and speak with the coaching staff to discuss positioning on the field. Similarly, after a losing trade, traders should review the charts and speak with the next best thing to a coach, their broker. A broker is equipped with experience and tools to hopefully better position you in your futures trading. One particular tool is the Depth-of-Market on our trading platforms. It displays the trading volume at each price level. It also displays the quantity of contracts working at certain price levels. This information is useful to know where a bulk of the trading may happen throughout a trading session. It would be prudent to place a stop loss away from a high traffic area.
Just as rugby players train according to a specific and purposeful practice schedule, traders need to develop a detailed trading plan before entering the market. While in a position, it’s important for the trader to adhere to the plan and leave emotion out of the trade. If the subsequent trade is not successful, the trader would be wise to reassess afterward and prepare for the next trading opportunity. If you are stopped out of a position for a loss, the risk should represent money that was earmarked as part of the trading plan. Undoubtedly, if you make repeated rash trading decisions, you may run out of money in your account, leaving you unable to move on to the next job.
Basic Training for Futures Traders
This guide provides tips for successful commodity trading compiled from the advice of more than one thousand futures brokers. The top 50 of more than five thousand suggestions are included in this guide.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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