Future Trading 101: Where do I even start?

Futures trading 101

Taking advantage of short-term price fluctuations within the intraday day trading of “scalping” the financial markets through the practice of day trading futures is a common approach to making profits. However, it is too a risky endeavor this requires a thorough understanding of the markets and careful planning. If you are new to day-to-day futures trading, here are a few things you should do first to get started:

1. Get education on futures day trading: Before you start day trading

   day trading
   

   Day trading is the buying and selling of a financial instrument (e.g. currencies, commodities, stocks) within a single trading day. This is done with the intention of making a short-term profit from the fluctuations of that particular instrument. Day trading is most popular in the foreign exchange (Forex) market and to a lesser extent with stocks and shares. The reason forex trading lends itself so well to day trading is because of its trading hours of 24 hours a day, 5 days a week. In addition, the high liquidity of Forex and, for retail traders, the low financial deposits required by brokers is a draw. Consequently, in recent years there has been a growing online community in applying day trading methods that utilize technical analysis related to intraday swing trading. Trend lines, candlestick patterns and technical indicators are particularly popular. Is Day Trading Right For You? Market conditions determine when and how a trader should employ which strategy or strategies. Entry and exit points are critical in this form of trading due to the relatively high cost of paying broker spreads and commissions. A day trader needs to be able to earn enough from their trading after the above costs, which can be particularly difficult for very short-term day traders known as scalpers. These traders typically remain in the market log for only a few seconds to a few seconds. The main benefit of day trading over longer term trading boils down to the simple fact that investors might wake up the next day and find that a key politician has said or done something unexpected.
   

   Day trading is the buying and selling of a financial instrument (e.g. currencies, commodities, stocks) within a single trading day. This is done with the intention of making a short-term profit from the fluctuations of that particular instrument. Day trading is most popular in the foreign exchange (Forex) market and to a lesser extent with stocks and shares. The reason forex trading lends itself so well to day trading is because of its trading hours of 24 hours a day, 5 days a week. In addition, the high liquidity of Forex and, for retail traders, the low financial deposits required by brokers is a draw. Consequently, in recent years there has been a growing online community in applying day trading methods that utilize technical analysis related to intraday swing trading. Trend lines, candlestick patterns and technical indicators are particularly popular. Is Day Trading Right For You? Market conditions determine when and how a trader should use which strategy or strategies. Entry and exit points are critical in this form of trading due to the relatively high cost of paying broker spreads and commissions. A day trader needs to be able to earn enough from their trading after the above costs, which can be particularly difficult for very short-term day traders known as scalpers. These traders typically remain in the market log for only a few seconds to a few seconds. The main advantage of day trading over longer term trading boils down to the simple fact that investors might wake up the next day and find that a key politician has said or done something unexpected.
   Read this term Futures, it is important to have a solid understanding of how the futures markets work. Educating yourself will give you a head start. This includes becoming familiar with the various futures contracts available, the function of margin and the ability to interpret futures quotes and charts. In addition, you need to educate yourself about the potential dangers of day trading and the tactics typically employed by profitable traders.

2. You need to open an account with a brokerage firm that specializes in futures trading to participate in futures trading. To do this, you need to choose a broker. Before choosing a brokerage, it is important to do your homework, research your alternatives, and evaluate the different offerings in terms of their costs, platforms, and other characteristics.
3. Create a futures trading strategy: Having a trading plan in place is one of the most important components to effective day trading. It should include your goals, risk management tactics, and the exact futures contracts you will be trading. Your strategy should also include a set of rules that dictate when you should enter and exit trades, how you should manage risk, and determine the size of your positions. An important note on the time frame to use: 1 minute and 5 minutes are popular. Some traders use range bars, for example 4 tick bars. I suggest starting with the 5 minute candlesticks.7
4. Practice futures trading with “paper trading”AKA a demo account: This is the most important part of this entire article, and your process when starting futures trading. The vast majority of brokerage firms will provide you with a free demo account so that you can get familiar with trading without putting any of your own money at risk. Before you start trading with real money, take advantage of this fantastic opportunity to put your trading strategy to the test and get a feel for the market.

   You can also test the absolutely ingenious and simple Paper Trading by TradingViewas I show in the following video:

   Now, some seasoned day and swing traders are claiming paper trading doesn’t cut it because going live will challenge your psychology to a whole new level, and practicing without real money can never match. While this is true, there is still a massive learning curve to go through before this mental part. What is your trading strategy? Where is your “edge”? What’s the typical risk-return ratio you’re aiming for, and how the heck do you even set a stop-loss and take-profit target? What about setting that critical DAILY MAX LOSS limit? And many other things you can learn from trading with play money.

5. Start with a modest trading budget: This is probably the most important part when going live. Start with a small amount of capital and gradually increase your trade size as you gain expertise and become familiar with the markets. This will help you reduce the risk you take and prevent you from making costly mistakes in the beginning.

By following these steps, you can put yourself in a position to be successful in the futures markets and start your day trading career successfully. To be successful in day trading over the long term, you need to pay attention to both your education and your risk management.

Trade futures at your own risk and visit ForexLive.com Technical Analysis to see some chart examples.

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