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Futures Trading Rules

CRITICAL LESSON: The Five Outcomes to a Trade

"Eliminate A Big Loss & Start Making Money"

The first 4, came from one of my mentors.  The fifth outcome was added by me after studying Marty Scwhartz.

To make a trade entry decision, there must be clear and defined setups to facilitate the decision.  When using too many indicators one can easily procrastinate and delay a decision.  By the time an entry is made, price action may have already moved by several points greatly affecting the size of the stop loss and therefore increasing risk to the trade.  

SwingArms provide a clear view of Value Area Zones allowing a trader to consider the setup easily, review trends and enter or not a position.

Some individuals prefer to day trade vs. Swing Trade. It is a matter of preference. Also, it limits the risk to the days’ news, events, and price action. A day trade may develop into a swing trade but that is not the initial plan.

The market provides each and everyday trade entry opportunities for the day trader. That is not the case for the Swing Trader. 

One must also wait and be patient to allow a set up to develop, test areas of support or resistance, allow backtests to occur, and then take the failed moves rejecting the level tested. 

As a Swing Trader, extreme patience is needed. You must wait for days, sometimes weeks for a proper set up to occur. This is one of the reasons, Swing Traders trade several symbols. Sometimes they trade 10 to 20 symbols so that there are opportunities a couple of days a week. 

Depending on your trading plan, geographic location, risk tolerance, account size, and trading style, your rules will vary.

Each Symbol (ie: /ES, /CL, etc) Has their own rhythm. You Must Learn to Trade to their music!

How Can A Trader Learn any Symbol’s Rhythm? by hours and hours of studying charts. This is only obtained with effort and experience.

Which Sessions to Trade? Asia? Europe or USA? or all...?

Deciding on what sessions to trade will depend on your location. I am located in Miami, FL. This makes it easy for me to trade the US Session. I have been studying the European session for over 8 months. Getting up at 2:50 AM each and everyday. This is not fun. At least not for me. But it has been a great education. There is a ton of opportunity when you are able to trade the European and US Sessions. Moving to Spain would be ideal for me!

When Day Trading both sessions (Europe & USA), one will get easily 3 to 5 trades with significant profit potential. For example, my trading plan for Oil (/CL) targets moves from $0.30 cents up to a $1 or two if the setup is strong. The goal is to trade with a tight stop (usually $150 per contract) but increase the number of contracts and take profits or adjust stop proactively.

This is a lesson learned from Marty Schwartz

You want to hear your cash register each and everyday. Smaller moves with multiple contracts, tight stops plus aggressive management.

WHERE TO PLACE YOUR STOPS?

Thousands of traders lose fortunes in the process of learning these lessons. It is actually harder than you think to implement consistently the lessons learned by traders before us and stick to your rules overtime.

It is quite simple to read a concept and think, it is easy to follow thru with them. The market will teach you a lesson each and every day. Stay humble and respect the market. If not, the market will take control of your account. Once your psychology starts to work against you, you are in big trouble and in some cases paralyzed. Once you react to a market move, you have lost thousands of dollars.

BASIC TRADING RULES

Locate a strong Support or Resistance level. Find one where price has come to before and rejected at least two times. Ideally, you want to draw channels and use channel walls as the guide.

Manage Profits

Once a trader figures out a system that allows the protection of capital, eliminating a “Big Loss”, then the focus becomes how and when to manage profits.

A trader’s success is measured by their ability to select a proper entry, protect capital without being taken out too early from the trade, and the ability to stay with the trade to an optimum profitable point of exit. If exiting a trade early, you can always get back in when retracement to support / resistance level occurs.

ThinkOrSwim SwingArms

Determine a dollar amount that you are willing to risk on the entry. ie. $100 per contract etc. In my case, my stops range from $150 (best option once the price is moving as expected) to $500 per contract maximum. Some traders with large accounts and a significant level of experience will use much larger stops and take longer to adjust their stops to break even.

The process of entering a trade and adjusting your stops requires knowledge and experience. Take your time to figure out what works for you as a trader.

From The Start – Set Your Stop and Profit Levels. Adjust Stop to protect profits only.

Manage Profits

Use Pre Set Orders With Built In Profit Targets and Stop Loss Protection
Sell Order ThinkOrSwim TD Ameritrade

My number one GOAL of a trade is to bring it to break even plus. Once the trade starts to develop as expected, adjust the stop to protect more profits. Continue this process as long as price action is agreeing with your expectations, if price action/trend fails to continue, adjust the stop or close the trade.
If after entering a trade based on your analysis, the price does not move as expected, either adjust the stop or close the trade.

The graphic below is an illustration. There are multiples ways of trading and managing stops.  Contact us for details.

Buy Order ThinkOrSwim TDAmeritrade

Adjust your Take Profit Target if Momentum Stops or Speeds up. Manage Profits.
Adjust Stop To Protect More and More Profits.

GENERAL TRADING RULES

Position Size

Initially, all new traders must paper trade as long as needed to understand the strategy, the process, and the software to be used.  When ready to go live, a trader must use the smalled contract option available.  This way, one may control risk and exposure as much as possible.  Keep quantity low as well.  Being careless and irresponsible will be costly and painful.  

New traders must stick to 1 contract maximum. After consistent weeks of profitable trading, 2 contracts assuming that the account is large enough to handle it. Stop Loss of $500 per contract at trade entry and quickly adjusted to $300 or $200 unit break even plus or more.

Experienced traders using blackFLAG FTS can use up to 4 contracts per symbol once a day. Then, 1 contract per trade per symbol. The goal is to capture the best set up of the day. Bank as much profit as possible and then trade small if any after that. To see an example of a bad day trading, please click here!

Account Size

Preferred Minimum Account Size $100,000 and higher.  Invididuals with smaller accounts need to paper trade, paper trade, and then paper trade.  Learn your process before risking any funds.  Once you have a proven track record on paper, then start slowly with the micro contract “/MES”  

Take your time and give yourself a chance to succeed.

Maximum Acceptable Loss / Day

It is a good idea to have a maximum amount of loss you are ok with a day. If that amount is reached, stop trading for the day. If your market analysis is not working out due to outside forces, be it news, politics, volume, etc, it best to STOP TRADING and wait for the next day. There is no rush to put money at risk without proper trade performance.

LESSONS YOU MUST LEARN!

YOU ARE WELCOME TO JOIN US. Contact me via Twitter to learn How To Reach Price Action Using SwingArms.

$ Millions Of Dollars Have Been Lost Before.
Do Not Become Part of The Statistics and Do Your Homework!