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50 Important Tips From Professional Futures Traders

Reprinted with permission from XPRESSTRADE.

Reasons 21-30

21. Taking too big a risk with too little profit potential is a sure road to losses. Never enter a trade when the risk is greater than the profit potential -- that's just common sense.

22. Many traders lose by not taking losses in proportion to the size of their accounts. The old adage in futures trading is "Risk not thy whole wad" on a single trade.

23. Often, traders do not recognize the difference between trading markets and trending markets.

24. Lack of discipline is a major shortcoming. Lack of discipline includes several lesser items; i.e., impatience, need for action, etc. Also, many traders are unable to take a loss and do it quickly. It's important to realize that human nature makes it very difficult to admit when one's wrong -- this has to be overcome.

25. Trading against the trend, especially without reasonable stops, insufficient capital and/or improper money management are major causes of large losses in the futures markets; however, a large capital base alone does not guarantee success.

26. Overtrading is dangerous, and often stems from lack of planning. Oftentimes, a trader begins with a plan and trades methodically. But as time passes, the plan is abandoned, and undisciplined, excessive trading results.

27. Trading very speculative and/or thin markets is a common mistake. Illiquid markets are prone to sudden and dramatic moves, which can be devastating.

28. There is a striking inability to stay with winning positions. Most traders are too willing to take small profits and, therefore, miss out on big profits. Another problem is under-capitalization; small accounts can't diversify or use valid stops.

29. Some traders are on an ego trip and won't take advice from another person; every trade must be their idea. There's a wide range of futures market research, analysis, and commentary on the Internet (just at XPRESSTRADE, there are numerous resources, for instance). Read these materials, and use them to confirm or to cast doubt on your own ideas.

30. Many traders have the habit of not cutting losses fast and getting out of winners too soon. It sounds simple, but it takes discipline to trade correctly. This is hard whether you're losing or winning.

Next chapter: Reasons 31-40

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