Sage Investment Club

Futures trading 101

Taking advantage of short-term price swings, within intraday day trading of “scalping”, in the financial markets through the practice of day trading futures is a common approach to generate a profit. However, it is also a high-risk endeavor that calls for a comprehensive grasp of the markets as well as the construction of a plan with great care. If you are new to trading futures on a daily basis, the following actions are the ones you should take initially to get started:

  1. Get some futures day trading education: Before you start day trading futures, it is essential to have a solid grasp of how the futures markets function. Educating yourself will help you get a head start. This involves becoming knowledgeable about the various futures contracts available, the function of margin, and the ability to interpret futures quotations and charts. In addition to this, you need to educate yourself about the potential dangers of day trading as well as the tactics that are typically implemented by profitable traders.
  2. You will need to create an account with a brokerage company that specializes in futures trading in order to participate in futures trading. To do this, you will need to choose a brokerage. Before settling on a brokerage, you should be sure to do your homework, investigate your alternatives, and assess the various offerings in terms of their costs, platforms, and other features.
  3. Create a futures trading strategy: Having a trading plan in place is one of the most important components of effective day trading. It should include your goals, tactics for risk management, and the exact futures contracts that you will trade in. Your strategy should also include a set of rules that dictate when you should join and exit trades, as well as how you should manage risk and determine the size of your positions. An important note about what timeframe to use: The 1-min and 5-min are popular ones. Some traders use range bars, for example 4 tick bars. I suggest to start with the 5-min candlesticks.7
  4. Practice futures trading with ‘paper trading, AKA a demo account: This is the most important part of this entire article, and your process in starting with futures trading. The vast majority of brokerage firms will provide you with a free demo account so that you may become familiar with trading without putting your own money at risk. Before you start trading with real money, you should take advantage of this fantastic chance to put your trading strategy to the test and gain a feel for the market.

    You can also test out the absolutely awesome and simple paper trading of TradingView, as I show in the video below:

    Now, some experienced day and swing traders claim: Paper trading doesn’t cut it, since when you go live, your psychology is challenged at a whole new level, and practicing without real money can never achieve that. While this is true, still, there is a massive learning curve to go through, even before this mental part. What is your trading strategy? Where is your ‘edge’? What is the typical reward vs risk ratio you go for, and how the heck do you even set a stop loss and take profit target? What about setting that critical DAILY MAX LOSS limit? And many other things that you can learn while trading with play money.

  5. Begin with a modest trading budget: This is probably the most important part when you go “live”. begin with a little amount of capital and gradually grow your trading size as you acquire expertise and get more familiar with the markets. This will assist you reduce the risk you take and keep you from making costly blunders in the beginning.

If you follow these steps, you may put yourself in a position to be successful in the futures markets and get your career as a day trader off to a good start. In order to be successful in day trading over the long term, you need to ensure that you pay close attention to both your education and your risk management.

Trading futures at your own risk and visit technical analysis to see some charting examples.

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