Tips On Futures Trading: Fund Management And Stop Loss Are Two Must-learn Tricks For Novices

Investors who have formed a habit of stock trading often find that many rules and operating methods are inconsistent with what they originally imagined when they first come into contact with the futures market.

When a stock is locked up, you can hold it and wait for the hold to be released. However, if you use the same idea to operate futures, the risk will be extremely high.

This text will elaborate on the relevant content. Specifically, when securities investors turn to the futures market, there are seven most critical points that must be made clear. With the help of these, we can help everyone avoid unnecessary twists and turns, thereby building a correct futures trading concept.

1. Understanding the trading rules is the bottom line

The futures market uses a margin system, which is also known as leverage trading. Through it, only a part of the funds can be used to buy and sell higher-value contracts.

At that time, daily debt-free settlement would be carried out after the daily close. If there were insufficient funds in the account and it could not be replenished before the opening of the next day, the position would be forced to be liquidated.

These rules are completely different from trading stocks in full and not keeping track of account profits and losses every day.

For newbies who have just entered the market, the first step is not to rush to check whether the market is rising or falling, but to understand the details of the transaction, the expiration date of the contract, and the regulations on position limits.

Many unnecessary losses actually stem from a partial understanding of the rules.

2. Fund management always ranks first

Stock investors are used to operating with full positions and feel that leaving money is a waste.

But when this habit is brought to the futures market, the consequences will be serious.

Since leverage magnifies profits and losses, even if a correct judgment is made on the direction, a small correction during the process will most likely result in the margin amount not meeting the requirements, and the position will be forcibly closed.

It is generally recommended that novices’ overnight positions should not exceed 30% of the total funds.

What has stood the test of fund management is discipline. The single volume is sometimes large and sometimes small, and there is the behavior of adding positions at will. This is the main reason why many people fail.

In fact, the difference between masters and novices in the futures field is often not reflected in the accuracy of judgment, but in more rigorous fund management and operational details.

Remember, staying in the market is more important than anything else.

3. If you go in the wrong direction, you must stop the loss decisively.

By holding stocks unchanged, investors can generally be regarded as "long-term shareholders." The reason is that even if the stock falls, there is a bottom line of value and it will not be completely lost.

But futures are different. If you look in the wrong direction and the loss continues, it is really possible. Lost everything .

Some investors, because they hold light positions or have floating profits in their accounts, do not strictly implement the stop-loss plan. This is a taboo.

Setting a stop loss position is not to predict the market, but to leave a way out for yourself.

Execute when the stop loss line is reached, don't hesitate, and don't take chances.

4. The most fearful thing is that hesitation will drag on the loss.

Many people are afraid of cutting their losses to the lowest or highest point as soon as they stop their losses, and they always want to hold on for a while longer.

This kind of thinking is very dangerous in the futures market.

The changes in the situation are immediately apparent, and once an extreme trend is encountered, all psychological resistance will be overcome within a few minutes.

And if you stop the loss in time, even if you are wrong, it will only be a small loss, and you still have the opportunity to continue trading.

When trading futures, you have to make a decision as soon as possible. The longer you delay, the greater the loss may be.

Don't always think about getting through it. You have survived it ten times before, but if you fail to survive it once, you will never have another chance.

5. Boldly seize short selling opportunities

The stock and real estate investment thinking has had an impact. Many novices are more likely to accept buying first and then selling. However, when it comes to short selling, that is, selling first and then buying, they always feel unsettled and unsteady.

In fact, futures are a "two-way street" and can be both long and short.

In a falling market, you can also make money by shorting.

If you only focus on going long, you will miss a lot of opportunities.

The key to understanding short selling is to view it as a normal trading method rather than some opportunistic move.

As long as you judge the trend correctly and follow the trend, long and short are both good strategies.

6. Don’t be afraid when you win, be bold when you lose.

Investors who have just entered the market often make this mistake: when their holdings are in a profitable state, they are very afraid that the profits will be spit out, so they hurriedly close their positions and then choose to leave the market. The final result is that they did not benefit from the subsequent long period of the market.

On the other hand, when losing money, they are very courageous and always imagine that they can make it back.

You may have been able to hold it back a few times before, but if you fail to hold it back once, you will have to leave the market completely.

The correct approach is: let profits run and use stop loss to control losses.

When you are in a profit situation, you must hold the order firmly and use the trailing stop loss method to protect the profit; when you are in a loss situation, do not have any illusions. Once you reach the set position, you must decisively admit your loss and exit.

7. Don’t treat futures as a casino

If you enter the futures market with the mentality of betting big or small, it is easy to fall into blindness.

Without considering the supply and demand of funds, not paying attention to the performance of market sentiment, not paying attention to macro changes, not referring to chart signal instructions, and placing orders based solely on random guessing and inspiration, this behavior is like a blind man riding a blind horse and hastily forward, which is extremely deplorable.

Futures trading is a rigorous investment activity that requires analysis, planning, execution and discipline.

Base your trading on rationality and rules rather than betting based on feelings.

Every opening of a position must be justified, and every stop loss must be prepared, so that it can survive in this market for a long time.

The most critical thing about changing from securities investment to futures trading is not how powerful technical analysis is, but the change in trading philosophy and risk awareness.

Keeping fund management in mind, keeping strict stop loss in mind, and engraving familiar rules in brain are much more important than studying which points to trade in and out every day.

There are many opportunities in the futures market, but only those who survive are qualified to talk about profits.