It doesn’t have to be that way, though. Far too many traders charge into the markets and improperly prepared for the challenges they will face. It’s easy to understand why. A casual examination of a future chart shows a serpentine pattern, up and down, that ought to be fairly simple to trade. There is also a tendency to assume that the serpentine patterns follow some sort of organized pattern. Figure out the pattern, and you ought to make money.

Wrong!

Study after study has shown there is a high component of randomness to futures trading charts. I do think there are some identifiable patterns buried in the random patterns, but they are not as obvious as one might think. No, learning to trade is far more than a perfunctory glance at a chart and placing trades when you think the market is moving one way or the other.

The very essence of trading is containment of risk. There are many components traders utilize to minimize risk, and most center on the concept of probability. The idea is to take high probability trades, and pass on low probability trades. Through training and experience traders learn the characteristics of high probability trades as well as the characteristics of low probability trades. Further, careful management of your futures trading account is essential. In order to minimize risk, a trader should never trade more than 8 to 10% of his account on any given trade.

But there is even more. I get ample opportunities to watch traders practicing and am amazed at how many traders enter trades without stops. It is essential to determine your level of risk on a given trade and set an appropriate stop loss order to assure you do not lose an excessive amount of money on a trade gone badly. In my opinion, this is the most frequently violated risk management tool. Frankly, it baffles me.

Day trading is far from living on the edge. The goal of the day trader is to both profit and minimize risk. Obviously more risk increases the likelihood of losing trades, and losing trades are not what traders want. For that reason we employ a variety of risk reduction procedures to increase our likelihood of success.

The more adept a trader adapts risk management techniques, the more prosperous he will be in the long run. Risk containment should be the primary goal of every trader, and lack of proper risk containment is the number one cause of trader failure. While it is very romantic to think of day trading in the same light as being a gunslinger, just the opposite is true. A good trader avoids confrontation with excessive risk and cowers against low probability trades.

Trading futures?

I have been trading most of my life and have found that trading futures from my home is a comparatively easy and profitable way to support myself. Further, with the correct methodology and mentoring I have schooled hundreds of other people to trade successfully. Since I am retired, I have found this to be a most enjoyable interest.

But isn’t trading futures really complicated?

The truth is it can be very complicated, if you make it complicated. My trading techniques are elementary and very practiced. Complexity does not equate to success. I started trading on the floor the NYSE long before we had fancy computers and elaborate algorithms. I learned a trade using simple indicators and was very properous. I still use simple indicators and am highly successful. You don’t need fancy computers or even elaborate computer programs to trade successfully on your computer. It’s actually a very simple exercise, and there are even practice accounts where you can hone you trading skills until you become proficient. Demo accounts are like real accounts except you are not trading real money, you are just trading hypothetical money.

I believe that, the most profitable Internet business is not signing up recruits in trying to get them to peddle programs for you. I need only rely upon myself to earn money and have been doing it for nearly 25 years. The point is, you could do it too. Learning to trade is a simple as taking an inexpensive e mini trading course and practicing until you become competant and at ease with the futures market The nice thing is there is no hurry, you can practice at your own rate and begin your trading career when you feel you are ready.

Many opportunity seeks avoid this line of work because they feel it is either too difficult or it is out of their comfort zone. You would be surprised at the individuals I have trained successfully. They include housewives, retired blue-collar workers, and a host of other unbelievable candidates. The point is; it can be done, and you can do it.

Won’t this take an a tremendous amount of effort?

There is some study and work involved in learning to trade. Of course, I am always there to answer questions via an 800 number and question you on?your path. You might even visualise a personal mentoring program if you want to get off to a promptly start.

So what’s so great about this trading?Who wants to sit in front of a computer all day?

It sure beats working all day in an office, or dig ditches, to say the least. And best of all, with a little practice you can become very successful and earn more money then you have probably ever made. The course I offer is easy to visualise and even easier to implement. There are no complicated equations or sophisticated math. You simply read what’s on the chart and compare it to what you have learned in the course. Everything you need to trade is in the trading course.

in the final analysis, I trade when I feel like it. It’s a wonderful life way to live and it gives me lots of time with my children and leisure time, especially golf. I would note that I am a better trader than a golfer.

So guess about it, perhaps you’re the next great trader.

I am a long time retail and institutional trader who now only trades part time, usually in the morning.  I enjoy composition informational articles about my style of trading so others may benefit.

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I think one of the most important issues, especially of late, is the issue of transparency in financial reporting. Both the stock market and futures markets are highly transparent exchanges with well-documented recordkeeping and long-standing procedures in trading. There are well-established trading and clearing procedures in these two types of exchanges that have evolved over decades of trading and now function in nearly seamless fashion, despite the number of fiduciaries involved with each individual transaction. To be sure, the procedural methodology in stock trading and futures trading are well-established and well documented through legal precedent and published in a manner that each investor should have a firm understanding of the risks and procedures involved in these two investment classes.

But the question is a bit more complicated than simple standardized procedures, as some investments lend themselves to specific types of trading while other classes of investments are better suited for different types of investing. For example, the pure speculator will probably lean towards futures contracts in his investment portfolio because of the high level of leverage and volatility futures contracts inherently possess. On the other hand, a conservative investor with a longer-term investment horizon might favor a blue-chip stocks as his favorite investment class. While there are instances where stock investing can be quite volatile, by and large stock investing is a more stable investment than their volatile cousin, the futures contract. The important point here is for the average investor to match his investment goals with a class of investments that will meet his needs and expectations. For example, an investor who prefers very volatile investments in hopes of making a tidy profit in a relatively short period of time probably shouldn’t invest in blue chip stocks. While some erratic movement in blue-chip stocks is possible, they are generally fairly stodgy and methodical in price movement. On the other hand, another investor may truly enjoy the volatile price movement involved in trading oil futures, for example. Oil futures are often very volatile and it takes a steady and skilled hand to manage these investments profitably. Just the same, the potential for extraordinary profits over a short period of time is far more likely in oil futures than blue-chip stocks. I must add one caveat, though: the fact that volatility exists in a given investment class does not assure profit, it only assures movement and it is up to the individual investor to translate that movement into profit, as opposed to loss.

In recent years another investment class has appeared and it is called Forex. Opinions on the Forex market range from a wholehearted acceptance of the investment to some investors who are, to say the least, very wary of the Forex market. I trade the Forex market from time to time and have not encountered any of the alleged horror stories some investors claim occur. But I think it is important to note that the Forex market, as opposed to the stock and futures markets, has very little transparency. There is no exchange on which Forex pairs are essentially traded. The Forex market is a loose conglomeration of participating banks that clear Forex trades more or less independently. To date, the system has worked reasonably well and been free from any widespread accusations of fraud or wrongdoing. To my way of thinking though, the lack of transparency in the Forex market is something that needs to be rectified before I can wholeheartedly embrace the Forex trading system. Without standardized contracts, exchange oversight, and a centralized location the possibility for widespread problems simply outweighs the possible benefits the Forex system offers. I think at some point this need will be realized and the Forex system will develop a centralized exchange with standardized contracts as the public clamors for the uniformity common to all investment classes. But to date, the system is still a loose association of banks and financial institutions clearing the Forex trades.

To my way of thinking, I will stick with stocks and futures contracts and my trading until the Forex system advances to the point of uniformity. Of course, there are uniform currency futures available on the Chicago Mercantile exchange for those who are interested in trading currencies. On positive note, I have no doubt that the Forex markets will evolve into a more structured trading format in the near future.

Why?

When I see a set up that I feel will result in a profitable trade I set a buy or sell order several ticks above or below ( depending on whether I am going long or short) above or below my target entry price and let the market come to me. Granted, I may miss a trader to using this strategy. But I generally add several ticks to my profit by not diving into the market and buying wherever the broker to get me in. I want to buy at a certain price to ensure that my trade is profitable. If you think about this carefully, over the course of five or six trades this will lead three or four points to your bottom line. That fact alone makes this strategy important to implement. On the other hand, many traders are not aware of the range of orders that can be utilized. Here are some of the common orders:

Market Order

This is the most common type of the commodity futures orders used on the exchanges. When you place a marker order you instruct your broker to enter a trade at the best price he can get. One advantage of a market order is that it has priority over some of the orders we will discuss below. In any event, a marker order is always filled at the bid or ask price. Of course, I feel there are some disadvantages to market orders which make them less than advantageous to use. For example, in a fast-moving market you have little control over the price at which you will be filled. I do not like to guess at the price at which I am going to be buying. Just the same, market orders are far and away the most popular order use on the futures exchanges.

Limit Order

If you’re planning to buy or sell a commodity futures contract at a better price than is available in the market at the time you would use a limit order. There is always the possibility that the price may not reach your limit order and you will not be filled, which is a risk you run with limit orders.

Let’s say for example, you want to go long the ES contract and the price is 1000, you may place a limit order at 990 and wait for the price to be filled at your limit order price. As a matter of course, a limit order can be either a day order or an open order.

Day Order

This type of order is a commodity futures contract order and will only be entered if it is filled by the close of business on that specific trading day unless a traders specifically asks for in order to be open, it will be treated as a day order

Open Order

This order will remain active until such time as it is filled or cancel the contract expires. Another term used to describe this contract is ‘good till canceled’ or GTC.

As a trader remember to keep track of your entering open orders, as they can accumulate and then you can receive a shock when suddenly a member of orders have been filled and you have gone beyond your margin position.

Bearing in mind the following points about a limit order; limit orders work well for you as a commodities trader if your strategy sets out what you will trade, where you trade, when you plan to enter and we’re going to exit for a profit.

There is no guarantee that orders can be executed and placed because the price may never touch the selected limited price.

Even if the market touches that price, there may be a large number of orders to be filled before your order.

When your order is eventually fill the price may be different to the point you have chosen as an entry point.

Stop Order

Commodity trading markets can be very volatile and one way to limit potential losses is to place a stop order or a stop loss.

While some commodity traders believe in using a mental stop loss trading strategy, most traders will use a real stop order as part of their trading protection mechanism. My personal belief is to always have stop orders in place when I enter a trade. Mental stop orders are illusory and a very poor trading strategy.

For the sake of clarity I have included several market orders that I do not use in this explanation orders. Stop orders and limit orders are the bread-and-butter of my trading style. I have no use for open orders, good till canceled orders, or day orders. As a scalper and active trader I am interested in entering trades at the best possible prices and protecting myself against adverse moves that are unanticipated. As a trader, it is virtually impossible to anticipate unusual events involving politics or natural disasters which can move the market at an accelerated rate. Stop orders are the only way to protect yourself against these types of unusual events.

As I have said earlier in this chapter, I generally avoid entering the market via a market order. Once I spot a potential trade set up I generally set a buy or sell two or three takes above or below ( depending whether I am considering going long or short) my potential entry point. I repeat, I want the market to move to me when I enter a trade, I do not want to chase the market price in order to get into a trade.

So we’ve had a chance to look at several different market orders and excluded several others as useless for our trading style. We have agreed that stop orders and limit orders are essential for our trading and I have explained I seldom enter a trade without a stop order in place. Further, I have discouraged traders from entering trades via market order and would encourage you to place limit orders and let the market come to you. I know these are small points in trading, but overall long period of time, they can add up to a significant number of points.