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50 Rules Of Futures Trading
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Futures Brokers Learn New Things Daily

One of the biggest advantages Futures Brokers have is the opportunity to see the entire trading process from the time their client decides to enter a trade till the trade is liquidated. Since most Futures Brokers have more than one client they get to see this process repeat over and over many time. These trading rules are based on years of watching many different traders and seeing many winning and losing trades.

1. Lack Of Fundamental Trading Plan

Trading is similar to starting and running a business and to run a successful business you need a business plan. In trading you need to put together a simple trading plan.

Experienced Futures Brokers Can Help You Put Together a Plan

If you don’t know how to put together a trading plan, most Futures Brokers can help you put together a basic trading plan that takes into account your risk tolerance, your account size, trading style, market choices and diversification.

Having a good trading plan can help most traders stay focused and help control emotions. A great majority of Futures Brokers would probably agree that emotions and trading don’t mix well and by following a trading plan you can stay away from making decisions based on how you feel.

2. Don’t Over Leverage Yourself

One issue most Futures Brokers would agree on is that over leveraging positions or putting on positions that have too much risk in light of your trading account is not advisable. You have to constantly remind yourself that leverage works both ways and losses are just as likely to occur as profits. My advice is to trade small sized contracts or mini contracts when you first begin trading till you get a good feel for the volatility of markets you are trading.

3. Losers Average Losers

paul tudor jones

Paul Tudor Jones

I don’t know if you’ve ever heard this saying before but it’s a reminder that’s posted on the wall of the office of Paul Tudor Jones, one of the most successful Futures Traders and Fund Managers of our time. I recently saw this picture and thought how important something must be to have it hang in front of you all day long.

I believe most Futures Brokers would agree that adding to losing positions is not such a great idea and the benefit compared to the potential risk is just too great, unjustified and completely unnecessary. In my opinion adding to a losing position is equivalent to adding good money after bad money.

Many people don’t know this but Paul Tudor Jones actually starting his career and experience working for a Futures Brokers firm.

 4. Trade With the Trend

Many Futures Brokers will tell you to trade with the trend, while this is great advice it’s not particularly specific and doesn’t really tell you anything about time frame, type of trends, how much angle a trend should have or how much movement against the trend will terminate the trend. I even remember reading an interview in one of the Market Wizards books where one professional trader recommended looking at a chart from the opposite side of the room to determine the direction of the major trend.

While this method may work for someone who is a Market Wizard, most beginners can benefit from an objective method that they can follow to determine if the  market in fact trending or choppy and moving sideways.

Futures Brokers Use Different Trend Identification Methods

One method that I find useful in helping me identify a trend is to place a 20 Day Exponential Moving Average (EMA) on the chart. If the Futures Market I’m analyzing is trading above the (EMA) then I would consider the Futures market in an uptrend. If the Futures market is trading below the (EMA) I would consider the Futures market in a downtrend.

Trading Rules From Futures Brokers

Learn Trading Rules From Futures Brokers

5. Avoid Market Orders

One very important tip Futures Brokers should share with their clients is to always watch market liquidity. While many beginners think that market liquidity is related to contract size or how many contracts are being traded, liquidity actually has a very important impact on the spread between the bid and the offer. Under normal circumstances, the spread between the bid and offer will tighten as liquidity and volume increases and widen as volume and liquidity decreases.

However, some contracts are inherently illiquid and have wide spreads the majority of the time. This is why it’s very important to use limit orders, especially when your trading illiquid markets or liquid markets during holiday’s or certain time of day when liquidity slows down, such as lunch time N.Y time. Limit orders are orders that limit the amount you are willing to pay for something.

If you are buying or going long, a limit order will limit the amount you are willing to pay for something. Conversely, if you are selling or going short, a limit order will limit the price you are willing to accept for your Futures contract.

What to Take Away From This Article?

  • Experienced Futures Brokers can be helpful to beginners.
  • Always have a workable trading plan in place that you can rely on.
  • Watch your risk carefully and increase position size very slowly.
  • Adding to a losing position is not recommended by most Futures Brokers.
  • Use an objective indicator to determine the direction of the trend.
  • Try to use limit orders instead of market order.

I hope you enjoyed reading this article about Futures Brokers rules for trading.

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NOTE: The articles content is based on the opinions of Active Futures LLC.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEB SITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.  SIMULATED RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING.  SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.