The Four Biggest Mistakes in Futures Trading

Introduction 1; 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; Summary 27; 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; Summary 52; 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; Summary 75; 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; Summary 96; Conclusion 98; Appendix A: Mathematical Formula for Standard Deviation 103; Standard Deviations 103