pro tips for futures traders

The trading profession isn’t a walk in the park, and based on studies run by several brokers, more than 90% of traders lose their hard-earned money in the markets. Regardless of that discouraging statistic, you can still be a consistently profitable trader if you learn to avoid some trading pitfalls.

Today, we are going to explore some of the mistakes and common pitfalls traders make, causing them to lose money, and how to best avoid these mistakes to guarantee longevity in the futures trading industry.

7 Common Mistakes Traders Make That Cause Them to Blow Their Accounts

1. Trading Without a Trading Plan

A common mistake that traders often make is to assume that practice and skills are enough to have a successful trading career. When we don’t have trading parameters or rules against which our trade ideas should be based, we end up living a loophole for emotional trading.

Thus, it’s essential that all traders have a solid trading plan with clearly outlined objectives, risk management, and trading times. It is by using a trading plan that traders can nurture a strong foundation and develop a clear path toward profitability.

2. Having Unrealistic Expectations

A lot of novice traders choose to become futures or forex traders for all the wrong reasons. They assume that by being futures traders, they will strike gold and sail into the sunset with nothing but profits.

It’s important to note that trading is incomparable to gambling, and like any profession, it requires a lot of hard work and sacrifice to master the skills and become a consistently profitable trader. You’ll need to have analytic skills, planning, and discipline if you intend to be in the game for long.

3. Risking More than You Can Afford to Lose

Whether you are a futures trader or a forex trader, knowing how to manage risk is critical if you don’t want to blow your account. Before you enter the market, always be prepared to risk what you are willing to lose.

There’s nothing as uncomfortable as being overexposed in the market. The moment you find yourself getting in and out of the market with losses under your belt, it may be a signal that you are slowly shifting from trading to gambling.

4. Failure to Cut Losses Short

Some traders will let a losing position run longer than it should have, hoping that the market will turn around and they will be profitable. There’s no faster way to wipe out your account than by letting a losing position run without stopping losses.

All the greatest traders in the world have experienced losses, but because they use stop-loss orders, they are able to get out of losing trades quickly and increase their winning trades over time.

5. Overleveraging

Leveraging is a valuable tool to have in your trading arsenal, but it can be a double-edged sword if mismanaged. Although it can be very tempting, especially for new traders who wish to grow their accounts quickly.

Most brokers allow their clients to enter the market with positions that are larger than their account balance without depositing the entire value of the position they want to open. It’s important to remember that overleveraging without a good understanding of the futures market can result in grand losses.

Always remember to stick to the leverage limits written down in your trading plan to protect your capital.

6 Anticipating News Trends or Events

It’s only gamblers who would try to anticipate news events and hedge on the potential outcome of those events. A good example would be trying to anticipate the announcement of a change in interest rates with the hope that an increase may trigger a short in certain futures markets.

As a trader, understanding economic fundamentals is important, but don’t solely base your trade decisions on high-impact news events. Exercise patience, and only trade when an opportunity presents itself.

7. Fear of Missing Out (FOMO)

Have you ever seen a market move headed in the direction you had analyzed, but for whatever reason couldn’t enter the market at the ideal time and now end up chasing the move? It has happened to me more times than I’d like to remember, and most times, I have either ended up losing the trade or blowing my account.

The lesson is patience. Don’t chase trades. Let the trade opportunity present itself, and only then should you enter the market.

In a nutshell, always stick to the rules you have in your trading plan.

Final Remarks

To be good at anything requires time, dedication, and hard work. Like any other skill, you need to practice as frequently as possible to become a consistently profitable trader. Take the time to simulate your trades on a demo account and back-test your trades whenever you can to ensure that your strategy is full proof, irrespective of the prevailing market conditions.