Money Management in Uncertain Futures

December 6, 2016 5:07AM CST

I cannot stress enough the importance of money management and risk control when trading the futures markets. The volatility and volume that is required to make for a successful trade can also be the bane that destroys an account. The first critical mistake many traders make is NOT trading with a plan. Each trade needs to have a beginning, a middle and an objective. The first rule of trading is to keep your risk/reward ratio at 3:1 or higher. The second rule is to determine at the onset how much risk capital you will dedicate to the position or at which point will you exit because you are wrong the market or the timing of your entry. Take the small losses. If it turns out you were right the market, re-enter at a more advantageous price and time. Many traders place an order that I call, “cancel if close”.  Stops are placed and when the market gets close to filling that stop, they pull the stop because they really do not want to take the loss. Absolutely wrong. Part of trading is taking losses. Those losses are part of money management. Leaving your with sufficient funds to continue on to the next trade.

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.