The learning curve involved with becoming an active futures trader can be brutal. Sudden, seemingly random, swings in asset pricing often leave novice traders on tilt and talking to themselves. The results can be devastating ― capital loss and chronic stress head up the list of ill effects.
However, gaining an education in futures doesn’t have to be a negative experience. Modern technology has brought the markets to our fingertips and given us a vast collection of educational resources, free-of-charge.
Learning How to Trade Futures Doesn’t Have to Cost You $1 Million
One of the primary reasons that new traders fail is that they don’t learn how to trade futures properly. In many cases, market newbies jump in with both feet, betting big and shooting for the moon. Unfortunately, this approach typically leads to early retirement courtesy of a blown-out trading account.
In the book What I Learned Losing a Million Dollars, Jim Paul and Brendan Moynihan break down the personal account of a big-time commodities trader who suffers the loss of lifetime. A single fateful trade in soybean oil futures brought financial catastrophe, and with it, an invaluable education.
The good news is that it doesn’t take a $1,000,000 loss in soybean oil to get a degree in futures trading. In fact, these tools listed are absolutely free and available online:
Losing money is certainly a motivator to improve performance, although it’s debatable whether the experience consistently aids in the building of successful traders. Advocates claim that the “only way to learn how to trade futures is to lose,” citing the benefits of negative reinforcement. Others maintain that promoting trader confidence is more conducive to achieving longevity in the marketplace. Regardless of these arguments, securing a basic education in futures need not cost a dime.
Post-Grad Futures Curriculum: Live Trading
Without a doubt, dedicated study can answer most questions pertaining to the mechanics of how to trade futures. Nonetheless, in order to become a trader, you’re going to have to actually trade in the live market.
No matter how many blogs you read or hours you put in on a simulator, there’s no substitute for trading real money. The risk of capital loss magnifies the human element ― specifically the emotions of fear and greed. If gone unchecked, fear and greed can make short work of any trading account.
Traders new to futures frequently struggle managing their emotions and dealing with the psychological impacts of trading. In order to mitigate capital drawdowns during this initial adjustment period, here are a few suggestions:
- Keep it simple: One of the most common mistakes those new to futures trading make is that they take on too much, too fast. It’s very easy to become overwhelmed and try to trade everything at once; resist this temptation! The diversity of futures allows you to streamline your trading approach and specialize in a single product or strategy. While learning the ropes in the live market, stick to what you know and keep it simple!
- Choose an ideal product: Product selection is a critical aspect of avoiding undue capital loss. Your ideal product should reflect available resources, trading goals, and strategic considerations. If money is tight, consider focusing on the E-micros or Micro E-mini contracts to limit risk exposure. Should your strategy perform best in volatile conditions, check out WTI crude oil. No matter the situation, the futures markets offer a suitable alternative.
- Use leverage wisely: The reckless implementation of leverage is an expensive way to learn futures. It’s important to insulate your account from sudden catastrophe and ensure that you’ll be around to trade tomorrow. At least in the beginning, the less leverage, the better.
There’s no substitute for trading real money in the live market. Coping with an account drawdown or build is an essential part of learning how to trade futures ― becoming proficient as quickly and cheaply as possible is the name of the game.
Getting Started In Futures
For more information on how to trade futures, contact the pros at Daniels Trading. Featuring an online educational suite, demo accounts, and no-obligation consultations, the team at Daniels stands ready to help you begin your journey into the marketplace on the right foot.