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Strategies/Methods for a New Futures Trader

Hello,
I am very new to trading. I opened an account with an online broker and got into investing earlier this year like many others. I initially just purchased stocks but became very interested in futures as I learned more about them. So, I started trading some through my online broker. Looking for a podcast I stumbled upon Optimus and was very happy to discover there were other brokers out there that has lower fees as well as to see the CEO be so interested in his customer’s success.

I initially had some success through pure, dumb luck and jumping on the large swings at the beginning and end of trading sessions and was up quite a bit. Once I started trading through Optimus Flow I really tanked though. Not the platform’s fault. I was overthinking it and looking back I was trading on too small of a time frame. I was missing the bigger picture. At some point last week I got down to a point where I haven’t been able to trade through Optimus due to low available margin.

Sorry to ramble but I wanted to provide a little bit of history to my experience level and where I am now. My main questions are these.

  1. I keep hearing about strategies/methods but I guess I am struggling to find them clearing defined? I have dabble with the basic trend posted on the blog the other day and had more success today after expanding to look at the hourly time frames. What other strategies or methods are good for a novice to try out?

  2. I really struggle with entry and exits. I know this is probably a pretty broad statement that applies to many traders but are there any general rules people like to follow?

I apologize if I am asking repetitive questions but I have looked through the forum and haven’t necessarily seen answer to the specific questions.

Thanks,
Wade

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Each trader has to develop his or her own method, and that is the challenge and the benefit of being a self-directed trader. You can develop entries and exits that sit ok with your risk tolerance.
I would suggest starting with the most basic:

  • Draw support and resistance
  • Choose three-time frames to give you a perspective of what is the trend, but trade off only one time frame only
  • Use moving average or other indicators to keep your objective (They may be lagging, but they will instill a discipline to look at a reference and not be impulsive)

There are no magic strategies that a mass of traders could follow and become successful. You will learn over time

If your struggle is developing/experimenting with a method for entries and exits, I suggest starting (as mentioned above) with simple support and resistance lines.
When making your plan, start by calculating reward and risk levels prior to entering a trade, then use those levels as a blueprint. Risk and reward behind your trades is very important as most trades may not go your way, so the winner must overcome losers.

Your biggest obstacle as a trader would be to “tame” yourself, controlling your impulses, and understanding there are universal rules that would help everyone.

Thank you,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

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Thanks so much Matt. I really appreciate all your input. I look forward to learning as much as possible from this forum and experiencing the markets.

The best advice I was ever given is to develop a method in a three step approach.

  1. This is where you see a reason to enter when conditions are right. (Trigger)
  2. Where you enter. This follows the right price action (setup)
  3. Decide on exit. This is where you exit the position whether a loss or profit. Exits are where you decide you maxed out the setup or where the setup failed.
    This simple approach helps me focus and avoid the emotional trades.

Thanks for the reply.

I agree. I guess I’m looking for some ideas for methods to try. The internet is a wealth of information, both good and bad. And a lot of it doesn’t apply to me in ways. There is lots of scalping for 1 point on the E-mini S&P which is great unless you are starting with a pretty small pile of cash.

I am doing lots of hunting to find some entry points. That has been a struggle to this point. I played around on the simulator and hit that big jump this morning by playing the stochastic and RSI following the trend. Too bad it was fake money. But good practice for me.

I am working on exits too but at this point I am having a hard time balancing the risk with giving the trade enough breathing room to perform. I think it will come with time, but time is money both literally and figuratively.

I am looking for small budget strategies and methods to try, or at least some very rudimentary fundamental rules to follow while I develop what really works for me.

Thanks very much.
Wade

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The internet is full of educators and paper trading promoters of “scalping” and that is mostly geared towards those who do not understand the Bid/Ask spread and risk to reward ratios. They think a tick here and tick there fills the basket of trades, it does not. Try to find reasonable point values where risk and reward is asymmetrical.

There are no small budget trading, but you can find low risk probability strategies. This comes with time but it takes many real time trades to build an arsenals of trades that you can examine and decide which trades you were able to maximize.

Nothing wrong with fake trades, but in real life just remember you will feel different and execution is very frustrating at times. On fake accounts you get filled constantly. I avoid fake account and test things on Micros and sometimes just trade on that contract.

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I have noticed that already and I can see scalping as a viable way to make some profit if you can trade certain contracts. I am trading the micros now. I have dabbled with some of the forex contracts but not risking much there.

What is a good resource for learning more about the Bid/Ask spread?

I can definitely tell the difference in the fake and the real trades. I am just trying to take it all in and learn as much as I can. I am fortunate to be able to work from home for the most part and I usually have the charts up to see what is going on.

Thanks very much.

The bid/ask spread is the difference between the buy and sell price.

For example, if you can buy at 4230.25 and sell at 4230.00, then that is a 1 tick spread. The market needs to move 1 tick before you can exit break-even (less commissions). If the bid/ask spread was larger, for example buy at 4230.75 and sell at 4230.00, you would need the market to move 4 ticks to break-even.

With futures, everybody trades on a central exchange and the spread is set by the market participants. Everybody sees and trades the same spread. On assets like Forex or CFDs, the spread is set by the broker, and different brokers can offer different spreads.

The smaller your profit targets, the more significant the spread becomes. If you want to capture 10 tick moves, then a 2 tick spread represents 20% of your profit. If you want to capture a 100 tick move, then it only represents 2%.

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