1. You need to get started with the right broker first. Not all brokers offer futures contracts. If you want to trade futures contracts
make sure to choose a broker who offers these options. In order to start trading futures contracts, you’ll need to have a brokerage account.
There are many different types of accounts available for traders including margin accounts, cash accounts, and marginable accounts. Each type of account has its own pros and cons, so make sure to research each before making a decision.
2. Once you’ve chosen the right broker, you need to look at what futures contracts they offer. Most brokers offer futures contracts for stocks, commodities, indices, currencies, and interest rates. Choosing the right contract type is critical because it affects how much leverage you can use, and how much risk you’re willing to take.
3. Now that you’ve picked out a broker and determined which futures contracts they provide, you need to pick a good strategy to follow. Futures strategies vary depending on whether you want to go long or short, and whether you’re looking to profit from price increases or decreases.
4. When choosing a strategy, consider your time frame. Are you trying to maximize profits over the long term? Or do you prefer taking small profits now and then while waiting for prices to increase? Either way, having a plan in place ahead of time can help keep things organized.
5. Now that you know what futures contracts you want to trade, it’s time to decide on which exchange to list them on. Different exchanges have different rules about which futures contracts they allow traders to list. Make sure to find out what exchanges are available and how they work before listing your contract.
6. After deciding where you’d like to list your contract, it’s time to determine if you would rather be a maker or a taker. A maker takes advantage of market movements by buying futures contracts on one side of the market and selling futures contracts on the opposite side of the market, allowing him or her to profit from rising or falling prices. Takers simply match buyers and sellers without affecting the price of the contract.
7. Finally, once you’ve decided on the right exchange and strategy to follow, it’s time to create your position. To begin, you’ll need to open a spot position and specify the quantity of the contract you want to buy (or sell).
8. Once you’ve created your position, you need to set a stop loss point. Your goal should be to limit your losses to no greater than 2% per day. However, you may want to reduce this amount based on your personal tolerance for risk. Setting a stop loss is just a precautionary measure. If you think the price of the contract is going to fall below your stop loss point, you can always close your position and lose only half of your initial investment.
9. Now that you’ve set a stop loss point, you’re ready to enter the market. Just remember to stay patient and wait for the best opportunity to enter the market. Don’t try to force a trade; instead, let the market dictate whether it wants to move higher or lower. If you feel comfortable with the current price movement, don’t hesitate to enter the market. Otherwise, wait until the price moves in your favor.
10. Now that you’ve entered the market, you need to monitor the price. Traders often use tools to track their positions and manage risk. One tool commonly used is the trailing stop. Trailing stops automatically adjust themselves based on the direction of the price movement. So if the price is moving higher, your trailing stop will raise and vice versa.
11. When it comes to managing risk, some traders prefer to utilize the concept of dollar-cost averaging. Dollar cost averaging involves investing equal amounts of money in the future. While this approach limits your maximum potential gains, it helps you avoid losing money due to unexpected volatility.
12. As your portfolio grows, you’ll want to periodically rebalance it. Rebalancing is the act of adjusting your portfolio based on changes in the value of each asset. By doing this, you ensure that the weighting of each asset remains consistent.
13. Rebalancing isn’t necessary every single month. Instead, it’s recommended to rebalance your portfolio quarterly. This will give you a chance to reevaluate your decisions and make any adjustments necessary.
14. Finally, after managing your portfolio, you’ll want to evaluate your performance. How did you do? Did your trades pay off? Were there any losses? Review your results and make any adjustments necessary to improve your performance.