The ten basic guidelines generally acknowledged by the US futures industry are based on the summary of the trading veterans and experts in the US futures industry. The following are the top ten basic guidelines for futures trading.
(1) learn before act
The mistake that some novices often make is that they don't know what they should do when they enter the market and they know nothing about the market. They never take the time to observe how the market moves and then take their money to take risks. Usually when people want to do something, they always observe first, then act. If you want to learn to dance, you have to watch how other people dance, and then try it. However, 80% of those people entering the market will stop trading after 12 months. The fundamental cause is that they are not starting from the first step. Traders should carefully review every detail of their trading system, know the errors that may occur in the system, or the various ways in which they may succeed. This process of education should include identified trading motivations, strategies, how to execute transactions, frequency of transactions, and transaction costs. Because of the commission, the higher the frequency of trading, the faster your profit will be consumed. Also consider your own personal characteristics in terms of the content of the transaction and the method of trading. Motivation is very important. Some successful traders can stay in the futures industry for a long time because they like trading. They don't let the desire to make big money disrupt their trading decisions. Some successful futures traders believe that earning money is not a good motivation. If using trading system to trade, the trading system should be tested repeatedly to know the possibility of losing. They must know their advantages on methodology, work habits, and specialization. If they don't know these advantages, they will take great risks.
(2) Reduce loss in time
When you are losing money, you must act decisively, stop trading, and reduce losses. When your trading position is profitable, let it grow further. This is an old creed. Many traders repeat this creed. The problem that many newcomers often make is that they hold positions losing money and they think the market will reverse. When their positions are profiting, they sell too early. They are eager to get initial profit and lose the opportunity to make their earnings grow. They are afraid that the profits gained will run away. Successful traders always earn large amount of money by using a small amount of money to compensate for small losses. The usual psychology of novices is to get out of the market as soon as they are profitable. If it’s profiting, they will accept instead of letting profits continue to grow. To expand profits, newcomers in the futures industry must learn to restrain the desire to be satisfied by small profits. The latter is very difficult to do.
(3) Compliance with discipline is crucial
Some disciplined traders who use a repeatedly tested trading system always make money. Those who lack a code of conduct often fail to adhere to consistent trading practices. In the transaction, making frequent changes and lacking consistency will destroy all profit opportunities. The advantages of some good trading systems need to be reflected by persistence. If you arbitrarily change or abandon a trading system or plan, then you have no trading system or plan at all. Some veteran traders believe that when you change or abandon a trading system just after losing, it may be the turning point for the trading system to make money. It is therefore important to maintain a consistent trading behavior.
(4) Focus on the trading process
Experienced traders emphasize that the whole process of trading should be focused rather than making money. Some well-known traders believe that losing money in futures trading is inevitable, and loss is an inevitable part of the trading process. Traders who focus on making money are likely to lose money. They can't deal with the inevitable decline in the investment process. When they make money, they are very emotional excited, and when they lose money, they are downcast or even panicking. It is not a good phenomenon of having emotions instability during the transaction. It is necessary to calmly focus on the whole process of trading. Futures traders cannot predict the direction of the market and what will happen to the market, but they can control the trading process. In fact, what they can control is only the trading process. The biggest problem for newcomers in the futures market is paying attention to making money and losing money, not the trading process. Some old traders said, if you are afraid of losing money, why do trading? You trade 10, 15 or 20 times, and surely one of them is a loss-making transaction.
(5) Know when to go out of the market
Traders should know when to take positions out of the market. No matter what kind of the system they use, they know when they must leave. This helps traders get rid of the having two minds and stick to one system, which can also help reduce losses. A stop loss order can be set to reduce losses. The market does not necessarily agree with your timing of entering the market, and the market is not interested in when you leave the market. The market is always operated according to its own rules. You must set the stop loss order according to the laws of the market operation. Considering that sometimes when your trading position has a loss, it is the moment of the turnaround, so you can't make the stop loss order too rigid. When placing a stop loss order, the turbulence of the market needs to be considered. Instructions should be based on an indicator of the market. For example, an average of market prices is usually the lowest price at a certain stage. Some traders set up stop-loss orders very casually, regardless of how the market operates. In this way they are likely to lose money. If the basis for the prescribed market order is a certain amount, the amount of money lost is often reduced, but the number of transactions for losing money is increased. If you set the stop loss order too rigid, you may have a series of bad transactions. There is a basis “avoiding wishful trading” for leaving, which is hoping for a reverse when loss occurs.
(6) Manage your funds
Senior traders recommend a percentage of funds that are prepared to take risks, which can be 2% or 3%. Never change it. Maintaining a consistent percentage of the risk of investment is a very important criterion. Some newcomers think that one or two transactions can make a lot of money, which is lying to themselves. This is a big difference between professional traders and amateur traders. This is the management of losses. Set a risk percentage for your own funds, you can reduce the size of the transaction in the case of continuous losses, maintain capital, limit the extent of the loss, limit the withdrawal of funds due to the number of contracts reduced. In this way, the scale of the transaction can be achieved in line with the size of the capital. When some newcomers encounter a loss in their position, they often cannot afford a temptation: take risks with bigger capital and look forward to reversing the loss situation. The more you take the risk, the bigger the loss will be. Reasonable money management is diversification of risk.
(7) Be in line with the trend: "Trend is your friend"
This is a repetitive sentence said by some old futures traders and the only route must be taken by futures trading. Successful traders believe that it is not important to predict the direction and ups and downs of the market, but to follow the trend. Many traders are advised to follow the trend of market development. In other words, it is to follow the trend of the market until the end of it. The advice of some experienced futures traders is: Never make comments on market or express opinions. The general trend of market development is your friend. You just follow the trend. Let the market tell you which direction you should go. A well-known futures trader once said that when the market forms a big trend, it is time to make money; when the market develops turnouts, you can't make big money.
(8) Do be emotional in trading
Experienced traders caution that you should not trade with your emotions. Keeping your mind steady is pivotal. This is especially important when doing futures trading. Professional traders emphasize: Remember that the market is not an individual's behavior. They believe that the loss of money is often caused by emotions. Some newcomers often forget everything and trade with emotions. They must be repeated over and over, lacking consistency and they can't think clearly about the problem. It is important to develop a trading method and stick to it. If the method works, discipline and patience are the keys to making money. Trading newcomers are easy to be emotional, while good traders are not like this. Don't insist that a position is correct and that the market is wrong. The market is always right. The market has nothing to do with your opinions and positions.
(9) Think about who is losing money
An interesting way for some well-known traders to arrange their trades is to think about who you are going to make money from. Everyone who enters the market obviously wants to make money, but not everyone can make money. There are always people losing money. When you make money, someone loses money. Futures trading veterans believe that you should know who you are going to get profit from. If you buy and think you are right, then the one you sell to also thinks he is right. People need to make money from those who think wrong. That is of course true. Some trend traders, or big traders, usually make money from hedgers. Because hedgers usually sell when the market rises, and buy when the market falls.
(10) Always maintain a humble attitude
Those who think they are smarter than everyone else on the market think they are always lucky. Their views will not last long. It should be humble in the face of the market. Otherwise the market will let you know that bad attitude will be problematic and will make you humble. This is what a very famous trader said. Some traditional views are often wrong. When you think that the information you have is very valuable, maybe others have already mastered this information.
Experienced futures traders believe that these guidelines are the key to survive in futures market and lead to success. Violation of these guidelines will lead to bankruptcy. In cruel speculation, following these guidelines can avoid becoming a “lamb on the altar”. The reason some amateur traders can never become professional traders is to fail to comply with these trading rules. As long as one or more trading rules are violated, when no one can overcome the weakness of humanity, these newcomers are difficult to survive under the brutal test of the market.