Trading Insights

Trading Insights

Futures Trading: A cautionary guide

Trading Insights
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I came across an interesting search of "Futures Trading" results in the Google search engine today. It's one of those trading articles where I sort of scream at the screen and want to choke the person on the other side of it that wrote the original article.

Look at this quote from tradingfutures.biz:

"...Think about it : if it were possible to devise a system for trading profitably, the owner of that system would become almost infinitely wealthy, and the markets in which he traded would cease to operate as indicators of real value. It's just plain silly to think that there's some way you can varnish your toe-nails while a 'system' gets you rich. If their system worked, it wouldn't be in their interest to sell it. The fact is, successful trading requires sound judgement and always involves some degree of risk.

Examples of pseudo-scientific mumbo-jumbo that is guaranteed to lose you money are :

~ The notion that markets move in waves, whose motion can be scientifically predicted. This is a particularly popular one because "after all, you only have to look at any chart to see that such waves exist". Yes, but try predicting the level of any given wave at any given time and you will find it is as futile an exercise as doing the same thing with real waves on a beach...."

Boy, that sure sounds pretty researched and heart felt, doesn't it?

When writing about stop loss orders, that same author writes * the following regarding their opinion:

"...So yes, you need to have a stop loss order in place, but it needs to be a long, long way from your original position and its triggering should mark the end of your campaign. If you do it right, it will almost certainly never be triggered, to the chagrin of your broker and to your enrichment...."

Right there, I take everything the author has said, ever will say, or is thinking about saying - and I throw it out the nearest window of the tallest building I can run into and climb up.

Why Michael? Isn't he trying to help futures traders?

Why? Because it flies in the face of everything I've ever witnessed since I started getting involved in the trading community over 6 years ago.

I've seen people trade without stops. I've watched them lose the fortunes of friends, families, and church members that trusted them with their futures - the futures of their spouses and their families. When someone says to trade with huge stops - or not use them at all - they lose instant credibility with me. I think it's a criminal statement, after watching the futures traders' lives post account explosion. Go back and ask the guys who didn't have stops on 9/11 what they think of that statement.

Secondly - I've met and seen traders that do nothing but trade systems mechanically - day in and day out. I've developed my own futures trading systems from scratch that traded 1 time a day - that were profitable 94 out of 100 recorded instances. I've shared systems with other people and had other people share their systems with me. The truth is - trading systems and methods are universally accepted as a possible source of income. Read "the New Market Wizards" with Jack Schwager, and you'll see how 18 traders around the world all subscribe to this theory to one extent or another. If you don't start out trading without a methodology - you're doomed to failure. The idea that you come to the market every day, making "judgement" in the moment, is an equally horrifying statement to me. I'd love to introduce the author to a trader that I knew that lost $3,000,000 dollars trading the S&P, with $250,000 profit targets and stop loss orders. Having lost it all, "making judgement" they tried to convince me that they didn't need a system....that they were emotionally "in control". It was frightening to listen to her speak...

Last and not least - the author tries to "debunk" the existence of predictable cycles. I know - from my observation of the real world - futures trading or otherwise,  that time cycles exist. We wake up every day, to a room full of customers - to a trading webinar each week filled with people who were given the prediction times the day before - and ask the question, "was this market predictable, and if so, what percentage of the time?". Week after week - the numbers come back from the feedback chat box in the trading webinar dialog box. "60+%......70%...." or sometimes higher. If these cycles didn't exist, we'd be out of business by now. The trading community would have hung us out to dry on every message board and every trading forum online. We'd have been sued for sure.

Trading, day trading, swing trading....if it's forex, options, futures trading - whatever kind of trading it is - needs to be approached somberly and with great fear and respect for the industry. This is not a country for old men, or women. This requires a level of dedication and commitment to excellence far beyond any other industry I've ever been involved with. To throw up a web page that says the things these guys are saying is pretty outrageous - and it hurts to read it.

I'd love to introduce them to my friend...whose futures trading account got down to $250, and his broker let him trade with margin. His goal was $250 a day, using $250 a day - or 100% returns, daily.

Why would anyone share their futures trading system - or share what they're using to make money? Simple.  You meet a guy like my $250 friend....like the man who lost everything he, and his friends and family ever had - and it changes you. Keeps you centered - and convicts you to help anyone that stops long enough to listen.

* (taken from www.tradingfutures.biz.com)