To be successful in futures trading, you must skillfully avoid many potential complications. Most experienced traders argue that success when trading futures does not come from specific strategies, but depends on following the basic rules, which allows you to stay in the game for a long time and achieve success.
Today we would like to look at our own mistakes, share our experiences and give advice when working with futures.
1. The desire to quickly and easily start earning money
Beginning futures traders who hope to quit their day job and make a living solely through trading in their early years of trading are often disappointed.
Just as it is impossible to become a professional doctor or lawyer in the first years of practice, trading requires years of hard work and dedication to success. Futures trading is not an immediate path to getting rich. Before making it your profession, it is important to first achieve success in this field by treating it as a hobby.
2. No stop loss
The use of stop orders can limit losses and help a trader determine the maximum possible loss in the event of an unsuccessful trade. Those who sit and wait too long for the market to turn around and move in their direction are usually doomed to failure. However, stop orders are imperfect because sometimes the price jumps over stop orders due to price gaps, leaving them without execution. It is important to understand that there are no perfect money management tools. The most reliable way to preserve your capital is yourself!
3. Lack of discipline and self-control
This is probably the main reason for losing money on futures. Spontaneous and emotional transactions, the desire to compensate for losses, can only increase your losses. It is important to always approach trading, especially futures, with a level head and assess the situation objectively.
4. Excessive belief in your success
Imagine the situation: you open a position on futures, it closes in plus, you open another one, and it closes in plus, and so on for several days in a row. You think: “Well, that’s it, I’m a professional trader, I trade only for profit, my strategy is ideal, it’s time to take on more leverage and sell off my investment portfolio, I’ll make money faster on futures...”.
Yes, you may be able to trade only in profit, and your strategy is really ideal, but it’s not worth transferring all your funds to a futures account, much less increasing your leverage.
This is fraught with the fact that at any moment something unexpected can happen in the world, such as the “coronavirus” in 2020, and all markets will plummet down, your stop loss will simply be knocked out, your position will be liquidated, and you will lose everything.
And here is a personal example of an unforeseen $BTC situation in May 2022, a broken stop loss and a very expensive mistake (-$5500). I’ll tell you more about this situation in the next part of the analysis of mistakes made when trading futures.
