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4 Things To Do Before Taking A Futures Trade

Every futures trader takes losses at one point or another, but the secret to success in day trading is to prepare. These 4 tips will help you minimize your risk and increase your chances of success.

Follow Your Trading Plan

A trading plan will specify what you’re buying and selling, how many contracts you will trade, and when you’re going to enter and exit. It’s not enough to know this stuff in your head.  Write it down, print it out, and keep it in front of you when you trade. Once you have developed a plan and tweaked it until it’s working for you, the key is to stick to it.

Know Your Maximum Daily Loss

Futures trading can be risky business so it is important to develop a rock-solid risk management strategy that ensures you don’t trade more money than you can afford to lose. Pick a specific Maximum Daily Loss (MDL) amount that you commit to sticking to, whether it’s $50/day, $300/day, or more. If you’re having a bad day and you hit or exceed your MDL on any single trade, immediately either stop trading for the day, or go into simulation. Too many traders make the mistake of thinking they can keep trading and get it all back, only to end up losing much more than they can afford to lose. This one commitment can make the difference between a good and bad week, month, and year.

Know Your Minimum Daily Profit

On the flip side, don’t be one of those futures traders who starts off having a great day, then ends up in the red by the end of the day. Pick a specific Minimum Daily Profit (MDP), and when you hit or exceed your MDP on any single trade, immediately lock in your profits and either quit trading for the day or go into simulation. Don’t get greedy!

Know When To Regroup

Even the best trading plans can let you down. If your plan isn’t performing as expected, causing losses three days in a row, it is important to stop trading live, go into simulation for a couple of days, and reassess the plan to determine what changes need to be made or whether a new plan must be created.

By following these four trading tips, you’ll have a clear set of directions to work from each day, you’ll reduce your losses, lock in your profits, and know when to modify your plan. Do it for 30 days, and watch what a world of difference it makes in your trading account.

Think we missed something? What’s YOUR #1 futures trading tip? Let us know in the comments below.

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