Money Management Strategies In Futures Trading

While most traders lose money in futures trading, winners are few and far between. But what sets apart winners from other traders? It is not on one’s ability to choosing precise entries but on money management. In this article, we shall guide you on properly managing your money to achieve trading success.

Discipline Is The Key

One of the areas where money management can help is in developing discipline. Without this trait, it will be tempting to enter an investment even though the risk of loss is greater than making profit. Having a money management strategy can also help in preventing you from trading based on emotions, fear, and greed.

Starting From Square One

When trading on the futures market, the ultimate goal of money management is risk control. Futures is an attractive venture because of the leverage that it gives. While a huge amount can be won with minimal capital, there is also the risk of losing more money than your balance. In risk control, you need to consider the rules regarding margins and minimums. If the leverage is a primary concern, apply more capital. While this reduces your overall return, it will also balance everything.

Plan Your Trading Risk

So what is the right amount to risk? There is no hard and fast rule on the right capital. However, Robert Peter Janitzek explains that you should take into account the size, risk tolerance, financial objectives, and how it fits the total trading plan. Conservative traders usually risk around 5 – 7% on one trade but you need to have a large capital or precise entry or exit points. Increasing that to a 12% risk can give more leverage and wider market swings. Exceeding that margin is not wrong but you have to consider other factors.

Stop Runaway Trading Losses

Implementing a stop-loss order is crucial in money management. However, some traders do not understand the “how” of placing such order. You cannot place it arbitrarily. Setting a stop limit requires careful consideration. Robert Janitzek reveals that the key to setting stops is that the price should fit the market. Trading on a market with little capital is not advisable. Make sure that the market you are trading fits the size of your account and risk tolerance.

The futures market offers potential traders with a huge opportunity to make money. However, managing your capital is also key to your success. Follow these tips and you are on your way to making profit from a trade.

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