From the December 2013 issue of Futures Magazine • Subscribe!

10 rules successful traders follow

3: Risk only what you can afford to lose

While traders plan on making money (that’s why people trade, after all), it is important to acknowledge that it does not always work out that way. It is essential that the money used to fund a trading account be what can be lost without impeding the ability to meet other financial obligations. Losing money is difficult enough, but it is even more so if it is capital that never should have been risked in the beginning.

It should go without saying that a trading account should not be funded with money earmarked for the kids’ college funds, the mortgage or day-to-day living expenses. Aside from being a terrible idea that can lead to disastrous financial losses and unfortunate circumstances, trading with money that is not expendable can put a trader under an extraordinary amount of pressure to succeed.

Often, this type of pressure leads to bad decisions and, ultimately, losses. Prior to trading, it is important to make an honest assessment that the money in the trading account is truly expendable. If it isn’t, traders should keep saving until it is.

4: Use technology to your advantage

Electronic trading has been around for a while, but the tools that are available to modern traders are constantly improving and evolving. Faster computers, high-speed Internet, all-electronic markets and direct-access trading  all have helped the independent retail trader. Additional technologies, such as trade automation, innovative market research tools and the ability to test trading systems accurately on historical data have given traders even more powerful tools. Mobile trading apps make it possible to scan for trading setups, enter orders and manage positions from a smart phone or tablet, giving traders a tremendous amount of previously unseen flexibility.

Using outdated technology can put a trader at a severe disadvantage. Trading is a competitive business, and it is best to assume that other market participants are taking full advantage of available trading technology. As with many other businesses, being (and remaining) competitive in trading means keeping up with technology. 

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