Most Common Pitfalls To Avoid When Trading Futures-Commodity Futures
500 experienced futures brokers were asked what caused most futures traders to lose money when comes to trading futures.
Their answers reflected the trading experience of more than 10,000 futures traders. Download the PDF and find out what they said.
1) Have A Plan
Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Consequently, they overtrade and use their equity to the limit (are undercapitalized), which puts them in a squeeze and forces them to liquidate positions. Usually, they liquidate the good trades and keep the bad ones. Learn how to do futures trading the right way.
2) News Factor
Many traders don’t realize the news they hear and read has, in many cases, already been discounted by the market.
3) Trade Objectively
After several profitable trades, many speculators become wild and nonconservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”
4) Know Your Size
Traders often try to carry too big a position with too little capital and trade too frequently for the size of the account.
5) Don’t Get Greedy When It Comes To Trading Futures
Some traders try to “beat the market” by day trading, nervous scalping, and getting greedy.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
The above sources were compiled from sources believed to be reliable. Cannon Trading assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The closing times for certain contracts may have been rescheduled.
Here in the United States yesterday, stock index futures vaulted on the heels of the Bureau of Labor Statistics’ release of its Consumer Price Index for October, which slowed to 3.2 percent last month on a year-over-year basis, lower than the 3.7 percent reading in September and the coolest since July. Leading the way was the Russell 2000 which climbed ±95 points, $4750 per contract move for the E-mini Russell 2000 futures contract, over a 5% uptick. Compare that to the ±86-point / $4,325 per contract move up for the E-mini S&P 500, or the ±335-point / ±$6,700 move for the E-mini Nasdaq.
Investors undoubtedly anticipated the likely end to the Federal Reserve’s historical rate hike cycle and this was followed by a wave of lower CPI data from Europe when the following day (our Tuesday night) Germany, the United Kingdom and Italy all reported below-estimate consumer price readings and well below last month’s as prices abroad continued to decelerate.
In other news, President Biden and China’s President Xi will meet south of San Francisco during afternoon US trading hours.
In a development attributed to El Niño and possibly a catalyst to rising commodities prices, Central America is experiencing drought conditions so acute, the freshwater lakes associated with the Panama Canal have declined to such low levels, it’s resulted in one of the world’s largest shipping corridors having to reduce vessel traffic. The canal sees about 5% of the world’s seaborne trade travel through it and is critical for transporting commodities with petroleum, liquefied natural gas and grains among the top shipments that pass through the waterway. Ships are now spending weeks waiting at sea, sailing around South America or the tip of Africa, or paying exorbitant amounts to jump to the front of the line. Last week, a Japanese global petroleum and metals conglomerate paid a record $3.975 million in an auction for preferential line placement for one of its ships.
In a Reuters piece earlier this week, the news wire reported that Goldman Sachs is forecasting returns of 21% on commodities over a 12-month horizon, using as its basis the S&P Goldman Sachs Commodity Index (GSCI), including gains of ±31% from energy and ±18% from industrial metals. Currently, the GSCI contains 24 commodities from all commodity sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
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Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
The Action Packed Week Ahead: Govt releases inflation numbers, over 2k earnings numbers, the Budget talks Friday deadline and 11 fed speeches.
By John Thorpe, Senior Broker
A respected daily futures market analyst : Hightower (free with a live trading account using the E-Futures trading platform, no charge) says about this week in the equities market:
“The next five days of trade could present historical volatility “
The Reasons are varied, from the issuance of the inflation numbers this week, CPI and PPI, to the Debt ceiling and the Moody’s downgrade of the U.S.’s debt to the middle of earnings season.
Tuesday:
For CPI Expectations tomorrow morning @ 7:30 a.m. CST.
This from the Analysts desk at Morningstar: The Consumer Price Index report for October 2023 is forecast to show a continued overall decline in inflation, led largely by moderating energy prices.
However, economists expect core CPI (which excludes volatile food and energy prices) to show stickiness rather than improvement, holding at levels well above the Federal Reserve’s target.
According to FactSet, the overall CPI is forecast to come in at a 3.3% annual rate in October, down from 3.7% in September. Meanwhile, core CPI is expected to remain at September’s levels, with a 4.1% increase from a year ago.
CSCO Cisco earnings after the close1.03 EPS estimate
TGT Target earnings in the middle of the day EPS 1.46 sh estimate
Wednesday:
For PPI final demand the econoday estimates are as follows:
Thursday:
Ahead of the open Walmart WMT analysts expect 1.41 / EPS
Jobless claims @ 7:30a,m, CST the consensus range is 201k -225K new claims
Industrial Production @ 8:15 a.m. CST
Friday:
Housing Starts and Permits @ 7:30 a.m. CST
And a total of 5 fed speakers through out the day.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
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In this issue:
Important Notices – Thank you Veterans!
Trading Resource of the Week – 2Essentials of Order Flow
Hot Market of the Week – March Wheat
Broker’s Trading System of the Week – ZB Day Trading System
Trading Levels for Next Week
Trading Reports for Next Week
Important Notices – Thank you Veterans!
We salute to all US Vets, Saturday is Veterans Day is a federal holiday, most government agencies and schools are closed. Thank you for fighting for our freedom and your service!!
The U.S. House must, at a minimum pass a continuing resolution by Friday November 17th to keep the Government open. That is the deadline for either a complete budget or a continuing stop gap resolution.
Tuesday: CPI @ 7:30 a.m. CST Earnings-HD Home depot after the close
Wednesday: PPI @ 7;30 A.M. CST Earnings-CSCO Cisco and TGT target after the close
Thursday: Pre open WMT Walmart earnings and BABA Alibaba.
Some of the softs (Sugar, Cocoa) active month is already March 2024. Check volume or check with your broker.
click above for a LIVE demo, streaming prices
Trading Resource of the Week
Essentials of Order Flow – FREE PDF
Order Flow has been presented as a mystique to potential Traders as well as seasoned Traders. In many cases it is assumed to be an insanely difficult concept to understand. Order Flow is, at its core, the transaction between a Buyer and a Seller. As a Veteran Trader using Order Flow to base my decisions, I can say that order flow is the very core of any market.
Hot market of the week is provided by QT Market Center, A swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
March Wheat completed its second downside PriceCount objective and has developed a sideways range trade. At this point, IF the chart can resume its break with new sustained lows, the third count would project a possible run to the $5.08 area.
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.
Broker’s Trading System of the Week
With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.
The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Questions about the markets? trading? platforms? technology? trading systems? Get answers with a complimentary, confidential consultation with a Cannon Trading Company series 3 broker.
Would you like to receive daily support & resistance levels?
First Notice (FN), Last trading (LT) Days for the Week: www.mrci.com
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading.
Good Trading!
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
Hopefully if you are already trading you have completed your initial education: contract specs, trading hours, futures brokers, platforms, the opportunities as well as the risk and need to use risk capital in futures, and so on. Understanding this information is essential to good futures trading strategies. The second type of education is ongoing: learning about trading techniques, the evolution of futures markets, different trading tools, and more.
2. Find A System
I am definitely not advising you to go on the web and subscribe to a “black box” system (using buy/sell triggers if don’t know why they are being generated). What I am advising is developing a trading technique: a general set of rules and a trading concept. As you progress, you may want to put the different rules and indicators into a computerized system, but the most important factor is to have a focus and a plan. Don’t just wake up in the morning and trade “blank.”
3. Survival
This is the key! Do what you need to do in order to survive this brutal business and give yourself the chance of being here down the road with more experience and a better chance of success. Survival is probably the biggest key for beginning traders. There is a saying in this business: “live to trade another day.” It is so true!
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
We have a new futures contract. It started trading on Monday. This is the Micro Henry Hub Natural Gas futures contract and corresponding options.
To quote directly from the CME Group web site, “The introduction of Micro Henry Hub Natural Gas futures and options responds directly to customer demand for a smaller, more precise instrument for managing natural gas price exposure. At one-tenth the size of the benchmark Henry Hub (NG) contract, Micro Henry Hub Natural Gas futures and options offer more granularity and smaller margin requirements with the same robust transparency and price discovery of the larger Henry Hub contracts.”
Follow the link below to the contract’s full contract specifications on the CME Group web site:
Heads up: most FCM’s / clearing firms, including the five FCM’s Cannon Trading Co. partners with, will monitor a new futures contract for sufficient liquidity before making it available to its clients. Give Cannon Trading a call to find out the availability of the contract.
Energy:
Incidentally, natural gas (basis Dec.) dropped ±50 cents (a ±$5,000 move) over the last six trading sessions to ±$3.10 /mmBtu. down to new 2-year lows on forecasts for above-normal temps. across the U.S. for the next fifteen days and continental U.S. production remaining near all-time highs,”
Financials:
Stock index futures are struggling today to extend their longest winning streak in two years – clocking seven straight daily gains – as we approach the close of trading. At this typing, the E-mini S&P 500 is trading just a few ticks either side of unchanged, while the E-mini Dow Jones and E-mini Nasdaq are slightly off.
More energy:
Crude oil extended its more than 2-week sell-off to its lowest level in over three months. From an intraday high of $89.85 per barrel on Oct. 20, the front month traded through $75.00 per barrel this morning – a ±$15.00 per barrel / $15,000 per contract move.
DAILY CHART BELOW
News pushing prices south include global demand worries, record U.S. production and ebbing supply concerns surrounding the Gaza conflict.
Given its ability to create a ripple effect, the ±15% price decline dragged U.S. pump prices down to levels not seen since March. It has also helped rein in inflation expectations and worrisome bond yields.
While this paints a picture that fears are subsiding that a wider conflict could be emerging in the Middle East and disrupt supplies, traders should remain on high alert for signs to the contrary.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
The Week Ahead: Earnings, Govt Reports, Powell Speech and any geopolitical developments
By John Thorpe, Senior Broker
Earnings, Govt Reports, Powell Speech and any geopolitical wrangling’s, events or additional crises always have the potential to move markets away from their trading ranges.
First up are the earnings reports, This week, due to the fact we don’t have any big names ( FAANG) reporting. Those 5 stocks individually can swing the markets violently on their respective earnings days with any surprises.
Instead, this week, we have 1400 plus earnings reports out on some names you would certainly be familiar with like Disney. The market is looking this week at sector earnings since there is no large cap phenom reporting the week.
IF the biomedical group stumbles with earnings this week, or the retail sector shows signs of weakening, construction sector, finance, the market will be looking at the health of sectors this week as earnings are pumped out before the open, during and after the trading sessions. So don’t expect sharp movements in the stock index prices this week from Earnings, but you can expect markets turning over in a more measured manner as reports flow.
Governmental Reports: yes we have a few but they tend to by a bit more fringe than say NFP or CPI, we do have a Jobless claims number this week on Thursday @ 7:30 CST.
Claims for November 4 week are expected @ 220K vs 217K the week prior. If you are looking for strong undercurrents in the markets you may find that Wednesday and Thursday will be your best bets. FRB Chair Powell will be speaking both days at separate events, Wednesday very early @8:15 CST followed by a later 1PM CST Thursday talk.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
