Regardless of experience level, size, or style, every futures trader must have the bare essentials to achieve longevity in the marketplace. Ultimately, your success will rely on having the four Cs: computing power, connectivity, confidence, and cash. If any of these elements are missing from your trading operation, then the odds of generating consistent returns diminishes exponentially.
Let’s take a look at the four Cs and a few essential tips on how you can maximize your potential in the marketplace.
The modern futures markets are digital in nature. Gone are the brick-and-mortar trading pits of the 20th century. Instead of a booming voice and hand signals, traders need computing power to stay on the competitive lead lap.
Of course, it’s simply not enough to have an old Commodore 64. Your CPU must be able to run a software trading platform as efficiently as possible. Make sure that your PC, laptop, or mobile device is equipped with an ample processor, RAM, and compatible operating system.
Tip: Robust computing power is a must-have for any serious futures trader. Equipment upgrades may seem expensive, but the cost pales in comparison to that of high latency. If your PC or mobile device is subpar, it’s worthwhile to invest in your technology infrastructure before risking real capital in the markets.
Computing power and connectivity go hand in hand―without one, the other is useless. For those traders who consistently lock down profits, eliminating undue latencies is a big reason why.
Enhancing your computing power is relatively easy. All you have to do is modernize your hardware, run software updates, and perform regular maintenance. It’s too bad that securing market connectivity isn’t that straightforward. Added latencies can hide in plain sight. Data bottlenecks, outdated fiber optics, server overloads, and inefficient order routing are easy-to-overlook issues that can undermine performance. It’s imperative that these items are regularly monitored to preserve the integrity of your market connectivity.
Tip: In the futures markets, ultra-low latency connections have an advantage over slower hookups. Make sure that your connection is as fast as possible by running regular ping tests with exchange servers. Also, investigate how your orders are routed, where they are held, and if your broker offers direct market access (DMA).
Cash Is King
Over the past two decades, the barriers to becoming a futures trader have been reduced dramatically. The contemporary marketplace is truly open to the masses. No longer do you need deep pockets or a seat on the exchange to participate.
Although it isn’t necessary to maintain a six-figure balance in your trading account, some money is required. However, the amount may be much smaller than you think. One of the primary benefits of futures trading is the diversity of options. Contracts of all sizes give participants the ability to customize their capital commitment and risk exposure.
Tip: If your capital resources are limited, check out the Micro E-mini lineup of products listed on the CME. Ultra-low margin requirements and reduced tick values give you the freedom to fine-tune your strategy and cash allocations.
For many things in life, success is a byproduct of confidence. Becoming a profitable futures trader certainly adheres to this broad generality. If you’re going to succeed in the markets, you must be confident in yourself or at least in your strategy.
Unfortunately, self-confidence is an attribute that proves elusive to many active traders. A rough period in the markets can shake even the strongest trader’s confidence. That’s why it’s imperative to always promote a positive mindset. You can accomplish this by establishing a statistically verifiable track record, preserving a positive internal dialogue, and taking periodic breaks.
Tip: As a general rule, losing money destroys confidence. If you hit a rough patch, take a break from the markets. Often, all you need is a little time to reboot before coming back to the markets invigorated and ready to trade.
There’s Much More to Being a Successful Futures Trader
The four Cs are essential to success, but they’re just the tip of the iceberg. To learn more about what makes a winning futures trader, check out the Daniels Trading e-book Basic Training for Futures Traders. Featuring input from more than 1,000 seasoned futures brokers, it gives the reader an inside look at futures from the market pros. Sign up to receive your complimentary copy today.