5 Steps to Successful Futures Trading
100% Trading Return: Is It Real?
Many people start trading because they want big returns. I was no exception. I thought 100% annual return was a very good number to achieve. And guess what, I achieved it again and again - in a third party audited trading contest!
It is not easy, to be sure, but 100% returns are definitely possible.
It is not easy, to be sure, but 100% returns are definitely possible.
Simply put, 100% return is doubling your money every year. Now of course no one can do it year after year, but it is still a good goal to aim for. The trick is to achieve it, you have to be willing to risk quite a bit - even the whole account. Going for big returns is NOT for the faint of heart!
Can You Have 100% Return On Trading?
Yes, with a lot of hard work, and probably some luck. Start with the steps below:
Steps in Futures Trading
Don't let anyone ever tell you the futures game is easy. I've been speculating in futures for 30+ years, and it took me most of that time before I had any degree of success. I attribute successful futures trading to following certain steps - steps in successful futures trading. My guess is that these steps will work for you, too.
Write a Trading Plan
Step 1: Have a Plan
Let's say you want to add a room to your house. Do you immediately just go out and buy lumber and supplies and start building? Of course not!
I've never seen someone build a house without detailed drawings, and I bet you haven't either. To build a house, you need a plan.
Yet most people will think nothing of opening a trading account, funding it, and then immediately start trading. CRAZY!!
You need a plan for speculating in the futures market. Your opponent, the market, has a plan - to take all your money - so you need one, too.
There are 3 major pieces to a good plan:
First, you must be specific with your investment goals.
Second, you must determine what you are willing to invest to get it, by identifying the amount of time and money you will invest.
Third, know what you'll risk to reach your goals. Are you willing to spend a year learning, or lose thousands of dollars before you start winning? Better to find that out now, upfront, before you invest the time and effort.
Let's say you want to add a room to your house. Do you immediately just go out and buy lumber and supplies and start building? Of course not!
I've never seen someone build a house without detailed drawings, and I bet you haven't either. To build a house, you need a plan.
Yet most people will think nothing of opening a trading account, funding it, and then immediately start trading. CRAZY!!
You need a plan for speculating in the futures market. Your opponent, the market, has a plan - to take all your money - so you need one, too.
There are 3 major pieces to a good plan:
First, you must be specific with your investment goals.
Second, you must determine what you are willing to invest to get it, by identifying the amount of time and money you will invest.
Third, know what you'll risk to reach your goals. Are you willing to spend a year learning, or lose thousands of dollars before you start winning? Better to find that out now, upfront, before you invest the time and effort.
Implement Multiple Trading Strategies
Step 2: Find A Process To Create One Strategy, And Then Duplicate It To Find Multiple Strategies
Finding a viable strategy is the most difficult part of developing a trading system. You might not think that's true, based on ads and infomercials you see, which show you how easy picking a strategy is. Alas, if it were only as easy as going to a free seminar in a hotel or visiting a website! In reality, finding a good strategy involves 3 main areas: skill assessment, research and detailed development.
The first part of determining how to reach your plan is to do an accurate, honest skill assessment. Done correctly, this will point you in the right direction. If you don't do this assessment, you'll be doomed to wander the "land of the losers." For example, if you want to algo trade, do you know how algo trading works? Can you program algos into a trading platform? If you lack programming skills, you will not get very far in algo trading.
The second component of your strategy is research. Before you settle in on a strategy, you need to see what is out there, what is working today, etc. Keep your mind open, and you'll soon find something that you like, and that has potential.
Finally, it's time to get your hands dirty by doing detailed development. Whether you create a system yourself, or sign up with a service or an advisor, the key is to perform "due diligence." Make sure you learn all you can, before you put real money on the line. This means learning how to backtest correctly, for example (most people do it incorrectly).
Step 3: Check and Double Check
Remember when you were in school and the teacher always said "check your work?" If you were like me, you thought checking your work was something you didn't need. Well, if you avoid checking your work before trading a strategy, you can easily fall into trouble.
Depending on the route you choose, there are many ways to double check your work. It might be as simple as checking your strategy code for math errors, or asking an advisor/educator to back up claims with verified data, or simply asking for references. Remember, it is your money, so take the time to thoroughly check everything out. As an example, if you do a quick google search, you will find some of my trading results, with actual real money, verified performance. Most traders do not have that!
Step 4: Execute Your Strategies
At this point, you are ready to pull the trigger, and trade your strategies with real money. The key here is to plan your trade, and trade your plan. Simply put, once you develop a method or select an advisor, stick with it, without deviation, for at least three to six months. Anything less, and random chance could make a good strategy look bad. Don't quit too early. Give a strategy time to show its long term potential.
Step 5: Monitor and Adjust as Necessary
Once you start trading, it is essential that you monitor your results. One way is by keeping a trading log. Recording the details of trades, along with your thoughts and feelings, can be very helpful when you review your system performance. This log is especially powerful when you violate your system, as you likely will at some point. Reviewing why you violated your system may help you refine your signals to more closely match your psychology. The key here is to keep close tabs on your trading - otherwise, it can quickly get out of control.
Conclusion
So there you have it - the five steps in successful futures trading that I have used in my own trading. Don't be surprised if it takes a year or more to move through the steps. My advice is to not rush through them. I obviously can't guarantee that you'll have favorable results, but I can tell you the steps work, and work well.
Finding a viable strategy is the most difficult part of developing a trading system. You might not think that's true, based on ads and infomercials you see, which show you how easy picking a strategy is. Alas, if it were only as easy as going to a free seminar in a hotel or visiting a website! In reality, finding a good strategy involves 3 main areas: skill assessment, research and detailed development.
The first part of determining how to reach your plan is to do an accurate, honest skill assessment. Done correctly, this will point you in the right direction. If you don't do this assessment, you'll be doomed to wander the "land of the losers." For example, if you want to algo trade, do you know how algo trading works? Can you program algos into a trading platform? If you lack programming skills, you will not get very far in algo trading.
The second component of your strategy is research. Before you settle in on a strategy, you need to see what is out there, what is working today, etc. Keep your mind open, and you'll soon find something that you like, and that has potential.
Finally, it's time to get your hands dirty by doing detailed development. Whether you create a system yourself, or sign up with a service or an advisor, the key is to perform "due diligence." Make sure you learn all you can, before you put real money on the line. This means learning how to backtest correctly, for example (most people do it incorrectly).
Step 3: Check and Double Check
Remember when you were in school and the teacher always said "check your work?" If you were like me, you thought checking your work was something you didn't need. Well, if you avoid checking your work before trading a strategy, you can easily fall into trouble.
Depending on the route you choose, there are many ways to double check your work. It might be as simple as checking your strategy code for math errors, or asking an advisor/educator to back up claims with verified data, or simply asking for references. Remember, it is your money, so take the time to thoroughly check everything out. As an example, if you do a quick google search, you will find some of my trading results, with actual real money, verified performance. Most traders do not have that!
Step 4: Execute Your Strategies
At this point, you are ready to pull the trigger, and trade your strategies with real money. The key here is to plan your trade, and trade your plan. Simply put, once you develop a method or select an advisor, stick with it, without deviation, for at least three to six months. Anything less, and random chance could make a good strategy look bad. Don't quit too early. Give a strategy time to show its long term potential.
Step 5: Monitor and Adjust as Necessary
Once you start trading, it is essential that you monitor your results. One way is by keeping a trading log. Recording the details of trades, along with your thoughts and feelings, can be very helpful when you review your system performance. This log is especially powerful when you violate your system, as you likely will at some point. Reviewing why you violated your system may help you refine your signals to more closely match your psychology. The key here is to keep close tabs on your trading - otherwise, it can quickly get out of control.
Conclusion
So there you have it - the five steps in successful futures trading that I have used in my own trading. Don't be surprised if it takes a year or more to move through the steps. My advice is to not rush through them. I obviously can't guarantee that you'll have favorable results, but I can tell you the steps work, and work well.
About The Author: Kevin Davey is an award winning private futures, forex and commodities trader. He has been trading for over 25 years.Three consecutive years, Kevin achieved over 100% annual returns in a real time, real money, year long trading contest, finishing in first or second place each of those years.
Kevin is the author of the highly acclaimed book "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: https://kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.
Kevin is the author of the highly acclaimed book "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: https://kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.