Top ten futures trading mistakes and how to avoid them

Futures trading is a highly lucrative and profitable form of investing. With the proper knowledge, strategies and tools, you can easily make money in futures markets. This article will cover the top ten futures trading mistakes and how to avoid them so that you, too, can become a successful trader.

Over-leveraging your position

One of the most frequent mistakes made by new traders is over-leveraging their position. This means they trade with more money available or take a riskier position than they can cover. While this can lead to significant profits if the trade works out in your favour, it can also result in huge losses if it goes against you. To avoid this mistake, always ensure that you are trading within your means and only taking on a little leverage for your account size.

Not having a plan

Going into any market without a plan is asking for trouble – especially regarding futures trading. A trading plan is essential for successful trading as it outlines exactly how you will enter and exit trades, your strategies, and your risk management parameters. Without one, you will be vulnerable to making mistakes or overtrading, which can lead to significant losses in the long run.

Not tracking your trades

Tracking and recording all the information related to each trade is essential to futures trading. With this data, it is easier to know what works and what doesn’t regarding your trading strategy. By keeping detailed records of every trade you take, you can better understand what strategies are successful and which are not – allowing you to make more informed decisions in the future.

Not managing risk properly

Risk management is an integral part of futures trading that many traders overlook. You must have a clear idea of how much risk you are willing to take on each trade and follow a strict set of risk management rules. For example, setting stop losses, limiting position sizes and not taking on too much leverage can all help to reduce the potential for significant losses.

Over-trading your account

Another common mistake made by traders is over-trading their accounts. This means taking too many trades or holding onto positions for too long, which can lead to significant losses if done incorrectly. To avoid this mistake, it’s essential to only take the trades that make sense from a risk/reward perspective and to exit them quickly when the market turns against you.

Not diversifying

Diversification is an integral part of any trading strategy. By diversifying your investments, you can reduce the overall risk of a single bad trade or market event wiping out your entire account. It’s essential to spread your money across multiple types of futures contracts and use different strategies for each. This way, if one contract or strategy fails, the others will provide a cushion against losses.

Not taking profits

Many traders must be more generous regarding their trades and take profits when available. This results in them missing out on potential profits that could have been taken had they sold earlier. Setting profit targets ahead of time ensures that you always take the right amount of money off the table at the right time.

Ignoring news and fundamentals

When trading futures, it’s essential to be aware of the latest news and fundamentals that could affect your trading markets. By keeping up with this information, you can better understand what is driving the markets and make more informed decisions when entering or exiting trades.

Not using proper risk management tools

Access to proper risk management tools such as stop losses, trailing stops and position sizing calculators can help traders manage their risks effectively while trading. These tools allow them to control their positions without worrying about potential losses due to market movements or unexpected events.

Relying on luck

Finally, relying on luck when trading futures is a surefire way to end up disappointed. There are no shortcuts to successful trading; instead, you should focus your efforts on learning the markets and developing an effective trading strategy. There needs to be more than luck to ensure consistent profits in the long run.

Final thoughts

There are many mistakes that traders can make while trading futures markets. Still, by understanding these common pitfalls and taking the necessary steps to avoid them, you can significantly increase your chances of success. 

By having a clear plan for entering and exiting trades, managing risk appropriately, tracking all of your trades and using proper risk management tools, you can give yourself the best chance possible at achieving consistent returns from your investments.

To start trading, you can open an account with Saxo.


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