Surprisingly, many profitable speculators have success rates
between 30% and 50%. Futures traders are not successful because
they predict prices well. They`re winning because their
profitable trades far exceed their losses. The truth of the
matter is all Futures systems win and lose.
Psychologically, this can make following a system difficult.
Futures market professionals achieve success in this environment
by controlling risk with money management rules. But,
controlling risk goes against our natural tendencies. Most
Futures traders don`t want to manage risk, they want to be
right. Despite the proven fact that money management is so
important, when Futures traders first come to me, many of my
clients focus their time looking for the perfect entry. It`s
their search for the Holy Grail. They want a perfect Futures
indicator.
Not only is this Futures indicator going to get them in right at
the bottom of the trend, but it`s also going to tell them at the
exact point at the top of the trend when to get out. Here`s the
best part and about this indicator: apparently, it can guarantee
success and it`s never, ever wrong.
Unfortunately, though I don`t like to disappoint my clients, I
need to let them know the hard truth. It does not matter whether
you are trading in the Futures or any other market, the simple
fact is this; there is no perfect indicator. Instead, there are
carefully set money management rules that will place you in
control. With this control, you`ll be able to follow the two
cardinal rules in your Futures trading - you`ll be able to let
your profits run and cut your losses short.
Once these money management rules are in place your system can
be set on autopilot. You won`t need to worry...
"Should I be holding this stock?"
OR
"Shouldn`t I be holding that type of stock?"
This uncertainty is what people are confronted with when they
don`t have their rules set for the Futures market. The end
result is that small losses end up being big losses.
To make matters worse, a few of these big losses strung together
can have a detrimental effect on your Futures trading capital.
Unfortunately, it`s much more difficult to trade to gain back
money you have lost then it is to trade with profits that you
already have in hand. If things go to the absolute extreme, you
run the risk of wiping out your entire Futures trading float, as
many traders do when they first get started. But, with your
money management rules in place, you can ride out the ups and
downs of every Futures trading system and succeed where many
fail.
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