Your goal should always be – Trade to Win.

This post may seem obvious but I think, from my observations, that most futures traders forget what their objectives are when trading futures or don’t even have any in the first place.

So often, I see clients who keep holding on to losing trades, just watching their losses grow and grow. When I ask them what their objective or strategy is in holding these ever mounting losses, I typically hear the same thing…”I’m waiting for the market to turn around so I can break even”. Most of the time, the market turn around doesn’t come soon enough and the client takes a huge loss.

In speaking with our clients, it seems to me that many go into futures trades with no objectives set or only know their loss objective, meaning they did place a stop order. Although it is a very good idea to use stop orders, you must also know your profit objective before you enter your futures trade. If you don’t, how do you know where to take profits?

Let me use this simply analogy. Let’s say you’re planning a road trip. You check the oil, tire pressure and may even get a tune-up for your car. These are all preventative measures, which are very smart to do. You certainly wouldn’t want to head out on a long road trip and have a tire blow out in the middle of nowhere because you didn’t know the tire was under-inflated. So you checked the tires before you left…think of this as your stop order. Now it’s time to leave. Do you know where you are going? Of course you do, you’ve programmed your GPS or printed out the map and directions you’ll need to get to your destination. Think of your destination as your profit target when trading futures.

Again, when speaking with clients about their futures trading, most will use stop orders, some don’t but typically most don’t have a profit target set. When I ask what is their profit objective, many will simply state that they’ll just let the trade go and see what happens. The problem with this ‘wait and see’ method is you’ll never know when you’ve reached your profit target; your destination. Just like your road trip, you wouldn’t get into your car and just start driving, with no destination in mind, so don’t trade futures without a profit destination in mind either. If you only have a loss objective (stop order) you’ll most likely get there first as it’s the only place that you’ve planned for.

To trade futures successfully, you need to have both profit and loss objectives set BEFORE you enter the futures position. For every futures trade I place, I know my risk and profit objectives and I stick to them. Trading futures this way gives me a clear road map as to where I’m going.

Now I’m certainly not suggesting that setting profit targets will eliminate any losses. I’m simply saying, if you have your objectives set, it will be much easier to take profits rather than waiting to see what happens. Without profit objectives, you may have a nice profit one day only to see it disappear the next because you had no predefined objective.

If you feel you can benefit from my years of experience trading futures (24+ years), may I suggest our Traders Advantage account plan. Our Traders Advantage account plan gives you the opportunity to work directly with myself. I’ll assist you in all aspects of trading futures & Options. Click the button below to get started today.

Best Wishes,

Joe Fallico
Principal Futures Broker
Series 3 & Series 30 Registered

Toll Free: 1-866-892-2030 – ext. 101
Phone: 1-847-379-5000

Insignia Futures & Options, Inc.

* Required disclaimer:

There is a risk of loss in futures trading.  Past performance is not necessarily indicative of future results.  Seasonal trades track historical price cycles and have the benefit of hindsight.  There is no guarantee that any seasonal trade will follow the same cycle as in previous years and as such, there is no guarantee of profit. The use of a stop loss order may not necessarily limit your loss to the intended amount.