Want to increase the profit you get from trading futures? This article explores 9 strategies for you to utilize in your next trading venture.
If one approaches futures trading with a thorough grasp of markets and a methodical approach to risk management, it can be financially rewarding.
We will look at some of the greatest strategies for futures profit maximization in this post, including trader psychology, futures risk management, trading journals, and fundamental analysis. We will also examine particular futures trading strategies that have been shown to be effective and explain how we may include them into our trading methodology.
Technical Analysis: Increase Your Futures Trading Profit Margin
Fundamental analysis evaluates charts by analyzing the price action of various securities and financial assets. Using tools such as chart patterns, trendlines, and indicators can improve futures trading profits by enabling traders to identify potential entry and exit points that provide an edge over the rest of the market.
A popular technique in technical analysis is using trend lines. A trendline is drawn by connecting various tops or bottoms, allowing us to visualize a trend easily. By drawing a trendline and watching for breaks or bounces off the line, traders can identify potential trend reversals and make trades accordingly.
To Enhance Technical Analysis, Apply Candlestick Patterns
Candlestick patterns are something that traders should learn, particularly as timeframes get smaller. Profitable futures trading styles include reversal patterns like the dragonfly Doji and the false break candle strategy. Technical analysis relies on candlestick patterns, and understanding them can lead to profitable futures trading.
For instance, we can wait for a candlestick confirmation before entering a position with a stop loss slightly lower if we link a trend line to at least two points in an established trend and watch for the price to retrace into the line. Because of its excellent risk-reward ratios and high degree of dependability, this is a very basic yet very successful trading strategy.
Profits from Futures Trading Can Be Increased by Using Trade Journals
A crucial element of successful futures trading tactics is keeping a trading journal. A trader’s methods, procedures, and transactions are meticulously documented in their trading notebook. This contains information about the contract traded, the entry and exit locations, and the daily profit or loss. A trading log allows traders to analyze previous transactions and spot trends and opportunities for development.
Here are some tips for creating a high-quality trading journal:
Establish Clear Objectives: Having specific objectives for your trading, such as raising your win rate or lowering your risk per transaction can be beneficial. Journals may even be psychological, such as when they disclose a trade’s result and practice mindful trading. Your trading log is an essential tool for tracking your progress toward these objectives and can help you make profitable trades in the futures market.
Note Important Details: Add the position size, entry and exit prices, date, and the futures contract you traded. Make a note of any significant news or events that impacted the market. Jot down your thoughts on what you did well and what you think you could have done better.
Review Your Transactions: Give yourself some time to think after every trade. Keep in mind that a deal does not necessarily indicate that it was a bad one, even if the result is a loss. Think about entry and departure points, risk management, and any emotions that may have impacted the decision-making process. If your emotions are racing as you make a decision, keep in mind that you are getting too tied to the result. You should always feel extremely at ease when you assume a new position if you adhere to your strategy exactly.
Stay Disciplined: Take note of every stance you adopt, without fail. This will make you responsible for every trading choice you make; otherwise, you risk making the mistake of thinking, “I’ll take this trade even though it’s not part of my plan, just for this one time.”
Put risk management first in order to increase futures trading profits. When attempting to maximize earnings from futures trading, risk management is perhaps the most important component of trading and investing. There is never a plan or level of experience that can make up for inadequate risk management. Important risk control elements to optimize futures trading earnings include:
- Limit Losses: Because they indicate the amount of money you are willing to lose on a particular trade, stop losses are an essential part of risk management. But it’s crucial to keep in mind that stop losses shouldn’t be applied too tightly to a position because doing so frequently results in the trade being liquidated even when the direction was accurate. Always have a stop in place, but space it out enough to allow the trade a chance to breathe.
- Position Sizing: This refers to modifying the size of your trades in accordance with your possible return and risk tolerance. In a volatile market such as NQ, it is not a good idea to take a high position size if your strategy specifies that only a few hundred dollars can be lost. In order to optimize your futures trading profit, you need to carefully manage the amount of your trades to make sure that any potential losses are within your risk tolerance and that the outcome of any one position does not affect the balance of your account
- Daily Loss Caps: Determining how much you are willing to lose each day will help keep bad days from getting worse. Remaining disciplined is essential since traders can be prone to making bad choices as a result of their emotional reactions to losses. These bad choices may lead to overtrading, which would hurt any earnings from futures trading in the end.
Map-out Your Plan Trading
An essential first step for any trader is to draft a futures trading plan. You can’t drive profits in futures trading without a plan, so take your time and come up with one that works for you. It needs to contain the following, but it doesn’t need to be extremely intricate:
Specify your objectives: What do you want to get out of trading? Do you want to learn more about the markets, augment your existing income, or earn a full-time income? Asking yourself “what do I want trading to provide me with?” will help you create a plan that is in line with your objectives.
Assess your level of risk tolerance: Trading involves a great deal of stress when it comes to capital risk. Fortunately, there are tools to help with this, such as Topstep. Nevertheless, you should still take into account things like your financial status, degree of experience, and amount of time you have to devote to the markets.
Decide which markets to pursue: Select the futures contracts that you wish to concentrate on. Every market fluctuates. In contrast, bonds have significantly greater liquidity than soybean futures, and crude oil is more volatile than the E-mini S&P 500. To gain a feel for each, please demo-trade for a while.
Establish your workspace: Pick a peaceful, cozy area with a dependable internet connection where you can conduct business; a dedicated office space can be a better option than a home office. Being locked in the market while the internet is down is the last thing any trader wants.
Create a schedule: Establish and adhere to particular times for trade. Take breaks and refrain from overtrading. Once more, you must practice extreme self-control to ensure that you never feel as though the market is in charge of you.
You may lay a strong foundation for your day trading experience by adhering to these guidelines and maintaining consistency in your approach. As your needs and objectives change, you must also examine and revise your plan.
Trading Techniques to Take into Account
It is important to keep in mind that even if you have the best strategy on paper, it won’t matter if you don’t have adequate risk management in place. For this reason, before you start backtesting and developing strategies, traders should concentrate on creating a strong plan to reduce risk. Although there are many approaches to trading the market and no right or wrong method to do it, the following are some successful futures trading tactics you could want to incorporate into your strategy:
- Mean Reversion: In this approach, assets that are trading much above or below their historical averages are bought and sold. This implies that traders can profit from price deviations because prices will eventually return to their mean or average. Using a VWAP indicator is one method for achieving this. The VWAP indicator is used by large institutions. Increasing the size of a trade if the price moves and retraces back to the VWAP is a typical tactic they employ.
- Momentum Trading: This tactic entails spotting and capitalizing on market trends. When employing momentum trading, traders seek out assets with significant price momentum and ride the trend until it begins to flag or reverse. For this one, trend lines or moving average pull-back techniques can be used.
- Trading within Ranges: Traders use this strategy to pinpoint a range that the market has been stuck in for a while. By placing purchase orders at the bottom of the range and selling ones at the top, they make money. The advantage of this method is that, in the case of buying, the risk is always defined as being below the range, and in the case of selling, as being above the range. Because the targets in range-bound techniques are on the other side of the range, risk benefit ratios are likewise advantageous in these situations.
Examine Trader Psychology
The topic of trading psychology is often disregarded, but this shouldn’t be the case. 90% of traders and investors lose money as a result of it. Far too many traders are clueless about what they seek from the markets. They adopt a gambler’s mentality rather than a probabilistic one since they are driven by their emotions and make snap decisions. The psychology of futures trading is also very specialized.
Have you ever considered what you hope to get out of the markets? Ever wonder why you work in the financial markets and what it will take to make money trading futures? Trading is only as hard as you make it, and that will show in your performance. Examine your trading results; they’ll tell you exactly what’s going on. You must make adjustments if you are not turning a profit that pleases you. It really is that easy.
How Does Visualizing Help Us Improve Futures Trading Profits?
Without visualization, we are blind and lack a clear sense of where we wish to go. We may train our subconscious mind to act, think, and trade like professionals by envisioning the profitable trader we aspire to be.
It takes time and requires a gestation period, similar to the delay experienced when adjusting a radio dial. Believing that you are already profitable is the goal. Try to picture the profits coming in without any effort, and accept the losses as though they were little. Always remember to be focused and concentrated, and to think in probabilities.
Consider how a professional would feel if you were to make a deal and were feeling nervous. Since they accept losses as a necessary part of the game, they probably wouldn’t feel anything at all.
How to Start Visualizing
Take a seat and unwind for a short while. For this, it is preferable if the body is perfectly still. After you’ve collected yourself, consider how an expert trader would proceed. Step by step, close your eyes, and see yourself trading in a composed manner. Imagine yourself sticking to your schedule and having fun working at your desk.
The daily review is an additional workout. The first step is to consciously review the entire trading day, from the beginning to the end. The inquiry concerned whether you adhered to your strategy and how you felt about each decision you made. If, at any point during the review, you realize that you’ve lost control, start by criticizing yourself and then picture a different scenario in which you maintained composure.
Trading involves a great deal of patience and discipline, which makes trader psychology crucial. Once you have mastered the fundamentals of charting and trading technicals, you should focus mostly on the psychological side of things.
