3. Risk Management
The most common mistake made by futures traders is the lack of any systematic risk-management. The high leverage and high volatility of the futures markets usually have a strong influence on a traders emotions. This emotional volatility results in a lack of objectivity and poor decision making. Have RESPECT for leveraged markets. The MARKET IS ALWAYS RIGHT. The aim therefore, is to devise a systematic approach and define in detail, parameters of a risk-management system. Under such a system, profits, and in particular losses, are defined and stop-loss orders are placed.
ALWAYS USE STOP LOSSES!
Its purpose is to attempt to limit your loss. However you must be aware that there is no guarantee that your stop loss order will be filled at your price. Dont use mental stops – mental stops get moved.
Absolutely, positively do not remove or move your stop-loss father away.
Place stops on the basis of how much money you are willing to lose on each trade. This amount is always a percentage of the equity in your account. Most professional traders never risk more than two – three percent of capital on any given trade. Figure...
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