Managing risk in futures

Most of us who have been in the business for a while have "paid" for the education.

I agree with some of the comments on the risks of option trading but when used correctly they are an effective way to manage risk which is the nature of your post.

I second RT trader on spread trading. The risks can explode but normally if you want to pick a few cents out of the grains with limited risk they are a good bet.

I'll try to find an old book I have on spreads and email you the title.
 
Quote from caroy:



I'll try to find an old book I have on spreads and email you the title.
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I'd appreciate it too -- maybe just post it here?

Read some books on trading systems. Pruitt/Hill have some good ones. Also James Altucher, Perry Kaufman, Thomas Stridsman.
 
A little trick that may help you out... Depending on your broker.

It's virtually the same thing as hitting your stop and taking your loss. Its a little different in that you are already in the market with a frozen position and are releasing contracts to cover losses and take profits when market conditions are right.

Setup two accounts.

LONG and Short.

Instead of stopping out add an equal and opposite position.
Freezing your position at your stop loss.

Should not require any margin as the positions are offsetting. When the market moves in a favorable direction you can identify simply release the counter position and the trade should cover your loss and profit out.

Teacher trick used when the game gets to fast or you are unclear in your positions. Freeze the market loss, prevent rushed mistakes and buy time for you to analyze positions or allow the market to move to a more probable success position for exit.

More of a mental trick cause your still in the batters box waiting for your pitch versus walking to the dug out after striking out.
 
I don't have the time to go into details on this sorry, just search around but I will hit some high point to help you.

Start off with the sim, seriously. Use something Ninja Trader from Mirus it's free and their fills are more difficult than normal, they put you last in line. Don't talk to me about real $$ until you can make money for atleast 1-2 weeks on sim consistently. This isn't a beginner's market, that's for sure.

Find a method of support and resistance you like. Only and I mean only take trades off those lines give or take a a point, in ES. The need to be real close to S/R or you pass.

Learn to trade with some basic price and volume, S/R, it's not critical but it helps for many. When price breaks below one of S/R levels on increasing range of bar or candle, and then on increasing volume and close low it's time to wake up. Then you look for a pullback on lighter volume to what was support and is now resistance and sell and you go in the direction of trend, what you see in the background, lower highs, lower lows shorts only.

You aim for you next S/R line. You start off by aiming for 3-1 reward to risk. Look up positive expectancy and get comfortable with those numbers. Start with 1 contract for every 5-10k you decide. Try the YM or NQ it's costs more on one side, but it's 5 bucks a tick. You can't get hurt too bad. Come up with a plan, put in writing and stick to it.

I am not an affiliate of these guys. I think they have some good material for free. Watch the video on reading price action several times. It's a good video on price, volume, S/R. Their point don't fade moves, you will get killed on days like today. http://tradepilotpro.blogspot.com/

Lastly if you see something that fits your plan but the stop is too $$$ pass. Yes pass. Risk management is everything in this business. Just ask the f-ups that are blowing up right now on wall street. :D I hope it helps. :)

Post Edit: I realize this doesn't answer your exact question, but these are all inferences to risk management. P.S. 4% is too much stay to 2% starting out.
 
First of all: Thank you to everyone. You’ve been most kind. I was almost afraid to post because I’ve seen people be kinda nasty at times on here.

I will certainly be looking into all the advice that’s been given and looking to work my plan. Also, I think I need to back off a bit right now while things are so very choppy but I am not deterred!

PocketChange: I actually was thinking about the exact thing you propose. I will see what my broker allows and consider working that angle.

Dandxg: Thanks for you input! I’m on OpenECry and traded their sim module for about a month before starting and did very well (IMHO). I was up over $4k in that time trading on a $10k start. HOWEVER, we all know that real money = real emotion and that has been more of a factor than I thought it would be even though I thought I was so very level headed. HA!
In your opinion, 2% of initial capital is all I should risk? Wow, that will make things even harder, but it would also further limit my losses. Hmmmmmm. Also, I’ve learned a lot more while “for real” trading about price and volume but I still don’t understand S/R enough and your comments are just another reminder that I need to study that more.

I think that’s the underlying theme here. I need to study more. :D

Again, thank you all and I look forward to even more discussion if anyone’s interested. I had two of those six beers I mentioned earlier and between that and a little dinner and all of everyone’s great input, I know tomorrow will be a better day.
 
You are welcome. When you start out you main goal is just to hang in there long enough to be able to play when you actually know how to read a chart. Also you need to have a daily max stop loss. It should be no more than your daily target. If you hit, go to sim, it's ok it happens to all of us.

The last thing we haven't hit upon and this is a biggy is psychology. Spend alot of time do what works for you that gets your mind right and emotionally balanced. Meditation, Hypnosis, books by ppl. like Brett Steenbarger and Mark Douglas. For some religion gets them in the zone, but find out what works for you. This is mind game and a damn tough one. You are doing the right things and asking some good questions, just remember a marathon and not a sprint, trading that is. When you start to get comfortable trading is a grind, boring and dull. The more boring it gets the better you are becoming.

Lastly, up to 3%, but no more per trade, but I say 2%.
 
Quote from lwmoss:

In your opinion, 2% of initial capital is all I should risk? Wow, that will make things even harder, but it would also further limit my losses. Hmmmmmm.
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That's funny, I'd suggest the opposite. If you are generally right in your analysis but you keep getting stopped out, then your stops are too tight. Tightening them more will not limit further losses. It will absolutely guarantee them.

Here's my best advice: Get a measurement of the average true range of each market you are trading on a 5 minute, 60 minute, and daily basis, and work out how much they generally move in each time frame in dollar terms. If I'm looking to enter a swing trade in a market that is moving $2500 a day, and I'm being prudent in my risk taking and only risking a few hundred a trade, you can bet that my account will eventually end up empty.

I threw tons of money out the window being prudent. I finally realized I had a few options. I could trade a lower time frame. I could find less volatile instruments to trade. I could put together a much larger stake. Or I could increase my risk per trade.

The best part? That was only one of the many, many expensive lessons I've learned so far. Good luck!
 
Quote from PocketChange:

A little trick that may help you out... Depending on your broker.

It's virtually the same thing as hitting your stop and taking your loss. Its a little different in that you are already in the market with a frozen position and are releasing contracts to cover losses and take profits when market conditions are right.

Setup two accounts.

LONG and Short.

Instead of stopping out add an equal and opposite position.
Freezing your position at your stop loss.

Should not require any margin as the positions are offsetting. When the market moves in a favorable direction you can identify simply release the counter position and the trade should cover your loss and profit out.

Teacher trick used when the game gets to fast or you are unclear in your positions. Freeze the market loss, prevent rushed mistakes and buy time for you to analyze positions or allow the market to move to a more probable success position for exit.

More of a mental trick cause your still in the batters box waiting for your pitch versus walking to the dug out after striking out.
More...

... And if "unfortunately", your "hedge" position turns negative when your initial position gets favorable, just initiate a second trade in the initial direction... and so on... It's just magic and your brokers will love you...Rotflmao
 
Quote from TraDaToR:

... And if "unfortunately", your "hedge" position turns negative when your initial position gets favorable, just initiate a second trade in the initial direction... and so on... It's just magic and your brokers will love you...Rotflmao
More...


Like i said... mental trick.. same as a stop... Still got a loss on the books. Still have to trade out profitably. No short cuts... no magic.
 
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