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I’ve been a futures broker for over 14 years and I’ve seen many traders come and go over the years. In my observations, I’ve come to identify what I feel are the top 5 reasons why futures traders lose money in the futures markets.

I’ve compiled this list not to discourage futures traders but to offer some insight as to what ‘not’ to do when trading futures & options. Some of these are common sense but when money and emotions are involved, it’s sometimes hard to keep a clear head.

You probably have heard of some of these, if not all of them but I urge you to really take them to heart when futures trading. With that being said, here’s my list (in no particular order) of futures trading pitfalls and how to avoid them…


  1. I see and speak with many traders who will see a news story on CNBC or in the Wall Street Journal and then will want to place a trade based upon that story. Unfortunately, by the time the news story is being sent out to the public, it’s usually too late to trade on that information. There’s an old adage in investing, which you may have heard, “Buy the rumor, sell the news”. What this means is by the time the press gets ahold of a market-moving story, it’s already been priced into the markets. My advice is to not try to make your trades solely on news stories. Of course it’s good to know the fundamentals of a market you may be considering trading but you don’t want a news story to be your sole reason for placing a trade.
  2. Unrealistic expectations is another trait I see a lot from inexperienced futures traders. Over the years, I’ve had many clients open an account with $2,000 or $3,000 and expect to turn it into a million dollars in a relatively short period of time (I seriously hear this all the time). They’ll tell me they just read a book on how to make a million dollars per year trading futures and now they’re going to do it all on their own. I let them know that although it’s possible, it’s extremely unlikely to turn $3,000 into $1,000,000 in a year’s time. That would be a whopping 33,324.63% return! My advice is to be realistic with your investment expectations and do the math. I typically ask, “What would you consider a good return on your money?” I usually hear 20% – 30%, which I agree, would be great. So do the math, a 25% return on a $3,000 investment would be $750. If you are realistic in your expected returns, you’ll be much happier with your trading.
  3. Failing to cut losses is a very big reason futures traders lose money. Time after time, I hear from clients who say, “I’ll just hold on for one more day”, only to see their losses grow bigger and bigger. Many futures traders I see won’t use a stop loss order or if they do, they keep adjusting it farther away as the market moves closer to it. My advice, know before you even enter a trade what you are willing to risk on the trade. Set your stop loss order accordingly and never adjust your stop price farther against your position.
  4. On the same note as #3, don’t cut your profits short. I see far too many traders take profits way too soon. The golden rule in futures trading is “Cut your losses and let your profits run”. Although this seems so simple and logical, many traders let their emotions get the best of them. They may have a profit target on a futures trade to make $600 but once they are in the trade and have a $200 profit going, they start to panic and just exit the position. My advice, start with a sound trading plan before you enter a trade. Know your profit and risk objectives and stick to them. As the market moves in your favor, adjust your stop loss prices accordingly to minimize any losses or to start locking in profits.
  5. Trading against the trend and trying to pick tops and bottoms is very dangerous in futures trading. I get calls all the time from clients saying they want to go short in a strong, upwardly trending market. I’ll ask them why they want to go against the trend and I usually hear, “Because the market can’t go any higher”. First of all, yes, it can go higher. Secondly, “Because it can’t go any higher” is never a good reason to enter a trade. The old saying, “The trend is your friend”, is still true to this day. It’s much easier to go with the flow than to fight the current.

I hope that the above information helps you make sound trading decisions. If you have any questions or to further discuss your trading strategies, please feel free to contact me.

Insignia Futures & Options is currently accepting new futures trading accounts. If you don’t already have your own Insignia Futures & Options trading account, I invite you to open yours today…

Best Wishes,


Joe Fallico

Principal Futures Broker
Series 3 & Series 30 Registered

Phone: 1-847-379-5000
Toll Free: 1-866-892-2030

Insignia Futures & Options, Inc.