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Here's something I just picked up from the newsgroups. Not bad.....
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What is the best way to trade futures? There is none. There are so
many ways
to trade, and so many successful traders trading in different ways with
different strategies. What it boils down to is the individual.
Most beginners are constantly searching for some sort of system of "holy
grail." However, even when they find a system that has produced
excellent real
time results for other traders, they still fail. The reason is they dont
have
the discipline to stick with the system when it experiences a drawdown.
Even the Market Wizards discussed in Schwager's books go through losing
periods. Normally, when this happens, they cut back on their trading,
or even
take time off.
The beginning trader must first do a self-analysis in order to determine
what
is the best way for them to trade. Here are some questions a trader
should ask
themselves when considering entry in to this game of trading.
1. How much time do I have each day to follow and analyze the markets?
If you
have a full time job, you should trade from a longer term perspective.
2. Am I willing to let some profitable positions turn into losers in
order to
capitalize on a potentially larger move? As a trend follower, you must
be able
to do this.
3. Must I be right on my trades most of the time? As a trader, you
really need
to check your ego at the door, because the markets will humble you if
you try
to impose your will on them. It is never whether you are right or
wrong, it is
how much you make when you have a profitable trade and how much you lose
on
your losing positions that determines whether you are successful or not.
4. Must you realize profits on the majority of your trades? If this is
the
case, you need to be very precise with your entries and exits, and
therefore,
be able to follow the markets very closely.
5. How much money can I afford to lose and still maintain my current
lifestyle? The vast majority of traders start with small accounts, ie,
$10,000
or less. This is why the vast majority of traders blow out in less than
a
year. You must be well capitalized to trade futures, due to the risks,
and
your likely lack of experience.
6. Do I need to make money on my trades to pay my bills? If this is
the case,
you have no business trading futures, unless you are some sort of wizard
trader. Trading futures profitably is one of the most difficult
businesses I
can think of. That is also why the rewards are so great for those that
do it
well.
These are just a few of the questions you must ask yourself. One of the
great
places to start learning about trading is reading. Read about the
successful
traders and their experiences. Learn about a variety of strategies and
then
determine which one's you are comfortable with. Then, test them on
historical
data. Finally, develop your trading plan, and stick with it. Then,
maybe, you
will have a chance at being a successful trader.
Scott Cole, CTA
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