Why do futures traders fail?

Futures are the financial contracts whereby the buyer is obliged to purchase an asset or the seller is obliged to sell an asset which can be a financial instrument or physical commodity. The transaction takes place at a predetermined future date and value. It is mentioned in the contract the quantity and quality of the asset in question. To facilitate trading on the future the assets are standardized. Some future contracts call for physical delivery of the asset while others are settled in cash.

futures traders

It is seen, many futures traders make a decent profit when they start trading initially and latter encounter endless string of losses. Sometimes their losses are so huge that they eat away their trading capital too. There are common pitfalls that you must know so you can avoid them.

You can decrease your loss and improve your odds for successes. We have discussed some common futures trading mistakes here that beginners usually make.

Not sticking to the strategy once it is made

Most of the traders have a strategy in place which helps them select trades as to keep loss minimum. When they are implementing their strategies and it starts showing fruits many traders start deviating or altogether  abandon the strategy and jump to some another one. By doing so they let emotions (greed, overconfidence) to creep in which ultimately leads to losses.

Not using buy/sell limits

Like all other trading activities, futures trading also involve a certain degree of risk and it is important to protect yourself. There are a few ways one can protect himself/herself. You can limit your buy or sell to a certain value so that your loss is in your comfort level. In other words, in the eventuality of loss you can withstand it financially. You can use hedging strategies like buying puts. The steps that you take to protect yourself will help keep loss to a minimum and it will maximize your profits.

Not concentrating properly

Futures trading require your full attention to read and evaluate markets effectively. There may be some distractions which are unavoidable and you can cut down on other few distractions, fewer the better.

Not open to new ideas

As everything change with time, so does the stock market. You may think of yourself as a great trader but there is always a new idea cropping up that can help you improve upon your results. Many a time traders think that they know a lot of things and there is nothing left for them to learn. As market condition change these types of ‘stubborn’ traders are left behind and they get only loss. If you welcome changes with open arms and embrace it in the way you trade, you will be able to change with the markets and profit consistently.

Alliance Research, under its derivative segment, provides intraday stock futures trading tips to traders. Our research team works for identifying movements in the futures market on an intraday basis. We provide recommendations that enable traders to earn maximum returns. Even help them reduce the risk. As per market movement, we provide 2 – 3 intraday future market calls and update you on important news and information.

Leave a Reply

Your email address will not be published. Required fields are marked *