Learn to avoid the 4 most common – and costly – mistakes futures traders make that cause them to lose money in the long run. Describes the opportunities and challenges of futures trading, and how the average trader can succeed in futures by embracing 4 key principles of trading mastery.
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"Veteran trader Jay Kaeppel describes the opportunities and challenges of futures trading with easy grace and engaging wit. After exploring the risks and rewards, Kaeppel shows how the average trader can succeed in futures by embracing four key principles of trading mastery."
-Nelson Freeburg, Editor/Publisher
Formula Research newsletter
From the creator of Futures Pro Trading System Software winner of 6 Readers Choice Awards in Technical Analysis of Stocks and Commodities magazine
This book will help you trade futures profitably by showing you how to identify-and-avoid making four common mistakes that can derail your plan and reduce your profits.
Following on the heels of his original bestseller, The Four Biggest Mistakes In Option Trading, system developer Kaeppel now focuses his attention on the volatile futures market and shows traders how to trade these markets to their advantage.
In Kaeppel's quick reading style you'll ...
- Learn how to assess whether you are financially-and emotionally-ready to trade futures.
- Determine how much money you can afford to risk.
- Learn what leverage is and how it can be used to generate above average returns without exposing yourself to too much risk.
- Understand why "fearing" the market is better-and-safer-than downplaying risk.
Now, steer clear of tr4ading missteps and learn how to trade more profitably-trade after trade-with Kaeppel's winning strategies.
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Table of Contents:
The Bad News, The Worse News, The Good
News and The Better News 1
Why So Many Fail 1
What Sets Futures Trading Apart 2
Attacking From The Bottom Up Versus The Top Down 3
One Word of Warning 4
Topics To Be Covered 5
MISTAKE #1: LACK OF A TRADING PLAN 7
What is Mistake #1 7
Why Do Traders Make Mistake #1 8
The Recipe For Trading Success (That Nobody Wants To Hear) to How To Avoid Mistake #1 11
The Litmus Test 12
How Much Capital Will You Commit To Futures Trading 13
What Market or Markets Will You Trade 14
What Type of Trading Time Frame Is Best For You 16
What Type of Trading Method Will You Use 20
What Criteria Will You Use To Enter a Trade 21
What Criteria Will You Use To Exit A Trade With A Profit 22
What Criteria Will You Use To Exit A Trade With A Loss 23
A Word Of Advice: Adhere to the Four Cornerstones 25
Go With The Trend 25
Cut Your Losses 26
Let Your Profits Run/Don't Let Big Winners Get Away 26
MISTAKE #2: USING TOO MUCH LEVERAGE 29
What is Mistake #2 29
Understanding Leverage 31
Why Do Traders Make Mistake #2 34
How To Avoid Mistake #2 35
The Role of Mechanical Trading Systems 37
Determining The Amount of Capital Required 37
Single Market Factor # 1: Optimal f 37
Calculating Optimal f 39
Single Market Factor #2: Largest Overnight Gap 40
Single Market Factor #3: Maximum Drawdown 43
One Caveat to Analyzing Trading System Results 45
Arriving at a Suggested Dollar Value Per Contract 46
Arriving at an "Aggressive" Suggested Account Size 48
Arriving at a "Conservative" Suggested Account Size 49
Arriving at an "Optimum" Suggested Account Size for Your Portfolio 50
Digging a Little Deeper 51
MISTAKE #3: FAILURE TO CONTROL RISK 55
What is Mistake #3 55
Why Do Traders Make Mistake #3 56
How To Avoid Mistake #3 58
Risk Control Method # 1: Diversification Among Different Markets 60
Risk Control Method #2: Diversification Among Trading Time Frames and Methods 63
Risk Control Method #3: Proper Account Sizing 65
Risk Control Method #4: Margin-to-Equity Ratio 66
Risk Control Method #5: Stop-Loss Orders 69
Placing a Stop-Loss Order In the Market Place 69
Using Mental Stops 71
Not Using Stop-Loss Orders At All 73
The One Important Benefit of Stop-Loss Orders 74
MISTAKE #4: LACK OF DISCIPLINE 77
What is Mistake #4 77
Why Do Traders Make Mistake #4 81
How To Avoid Mistake #4 82
Overcoming The IQ Obstacle 83
A Word of Advice: Don' t Think, React 85
Avoid Simple Traps 87
The Cure for "Woulda, Shoulda, Coulda" 89
System Development versus System "Tinkering" 91
Asking The Right Question 93
APPENDIX A: Mathematical Formula for Standard Deviation 103
Standard Deviations 103
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