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Futures Trading Levels, Mental Risk Management

Posted on by Ilan

Cannon Trading / E-Futures.com

Good reading put together by a trading colleague from TradingEmini.com:

Mental Risk Management

“When you learn what not to do in order not to loose, only then can you begin to learn what to do in order to win” Edwin Lefevre, Reminiscences of a Stock Operator

1. Managing Position Size
Size envy can make traders take larger positions than they should. Most people can’t walk straight into a gym and bench press 300lbs. Traders must build up financial capacity, technical skills and emotional development, judging progress against their own levels not others.
2. Dreaming of a Big Win
This is the earmark of a beginner. The key to success is consistency, steadily achieving profits with a simple sound process and using runners catch the larger moves or position trade with a separate broker account. A successful athlete focuses on the steps to achieve results not the results.
3. Vengeance Trading
Vengeance trading is when a trader takes a hit and wants to get even with the market risking financial, emotional capital. The angry trader wants revenge, to prove they were right, so they stubbornly enter in the same direction as the loosing trade, focusing on where the trade did not go, rather than where another trade could go in a market which is always impersonal and never wrong.
4. Boredom
The mind will go to great lengths to avoid boredom. A Gamblers Anonymous maxim holds that gambling, or overtrading, is a sign of boredom, so recognize when you are becoming bored and dismiss it as a false emotional trigger.
5. The Averaging Down Sin
Averaging down is adding to a looser, with the hope that it will turn around, without regard for the reality of what your charts are telling you. Never average down, you are stubbornly refusing to admit you are wrong.
6. Are you Trading Intelligently or Gambling
Successful traders trigger when the odds are favourable. Gamblers trigger on hope. A gambler can’t explain why they won other than they had a “gut feeling”. They trade for excitement, with no plan or discipline, unwilling to accept reality, believing they can have good things without effort.

The Gamblers Anonymous 12-steps can help control loses. For example,

  • “Make a searching and fearless moral and financial inventory of ourselves” Know why you want to be a trader, what you expect to get out of it and whether you really have the right support and financial basis to trade.

 

  • “Admit to ourselves and to another human being the exact nature of our wrongs” Keep an honest trading journal and have an accountability group, be it other traders, friends or family.

 

  • “Continue to take a personal inventory, and when we are wrong, promptly admit it” When in a bad trade admit it and get out. You must take personal responsibility for your actions and not blame others or “The market”.

 

  • Trading can be enjoyable and social, gambling is lonely and heartbreaking, The Recovery Book sums it up in one sentence “To gamble risking progressive deterioration OR Not to gamble and develop a better way of life”.

Trading commodity futures and options involves substantial risk of loss.
The recommendations contained in this letter is of opinion only and does not guarantee any profits.
These are risky markets and only risk capital should be used.
Past performance is not necessarily indicative of future results. Continue reading “Futures Trading Levels, Mental Risk Management”

Futures Trading Levels, 8 Steps to Successful Day Trading

Posted on by Ilan

Cannon Trading / E-Futures.com

Quick reading material for the weekend:

Cannon Trading Education

8 Steps to Successful Futures Day Trading

Introduction

My name is Ilan Levy-Mayer and I am the Vice President and Senior Broker at Cannon Trading. I came up with the following personal observations after serving online traders worldwide for more than 13 years. The following steps are guides to progress, and are not necessarily in sequential order. Some of them are always required, but each trader is different and will relate to these stages in their own ways. While attempting to learn and progress, one must keep in mind that futures trading is risky and can involve significant losses.

1.Education

Hopefully if you are already trading you have completed your initial education: contract specs, trading hours, 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 trading. The second type of education is ongoing: learning about trading techniques, the evolution of 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!

4.Money Management

While it is closely related to survival, money management can also stand alone. For your own survival, you must set trade/daily/weekly loss limits. Sound money

management is closely associated with knowing your risk-reward ratio (again, per trade and per time frame).

5.Goals

You should have a game plan and established goals which will function as a road map to measure your progress and improvement. Set per-trade goals, daily goals, weekly goals, etc. Many of you who are clients are familiar with these questions: What is your daily profit goal? Where do you see yourself in a week from now.? Six months from now? A year from now? How are you planning to get there? Break it down into small steps, and you’ll always know whether or not you’re on the right track. And do not forget to continually reevaluate your financial situation as it pertains to risk capital.

6.Experience

If you made it to this stage you’re on the right track! Just like anything else in life, the more experience you have, the greater your success is likely to be. The key is to acquire the experience without devastating your risk capital. What good is experience without risk capital in your trading account?

7.Learn your Setups, Strengths, and Weaknesses

Teach yourself to recognize different set-ups that you feel comfortable and confident with. Then attack. You cannot get to this stage without going through the previous steps. If you did not survive, develop a trading system, set goals, etc., you may recognize the right setups but lack the confidence or the cash to take advantage. I sometimes compare being the “pro” to the lion who is waiting patiently for its prey and then attacks when the time is right!

8.Trading on a Consistent Basis

This means you will continue to evolve as a trader and go through these stages over the years again and again.

In Conclusion

Don’t be discouraged by reading this. Succeeding in futures trading takes hard work and time.

Please be realistic, make sure you only try this with risk capital only and periodically check yourself and try to learn from your mistakes and successes.

Disclaimer

The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used.

Past results are not necessarily indicative of future results. The risk of loss in trading

can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

Day trading can be extremely risky. Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. And more, you should not fund day-trading activities with funds required to meet your living expenses or change your standard of living.

You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.

Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and you will pay commission on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings.

Day trading on margin may result in losses beyond your initial investment. An investment of less that $25,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $25,000 or more will not guarantee success.

Cannon Trading Company
(800) 454-9572

I share much more each trading day via daily service I call NAZLAN LIVE CHARTS. You can try it free for 2 weeks at:

Nazlan Live Charts Continue reading “Futures Trading Levels, 8 Steps to Successful Day Trading”

Futures Trading Levels, Watch Out for Monthly Unemployment Report Tomorrow

Posted on by Ilan

Cannon Trading / E-Futures.com

Monthly unemployment tomorrow before the cash open.

We had HUGE volatility in many markets today, led by Crude Oil, Silver, gold and currencies…..

Make sure you know the type and size of risk you are willing to take before each trade….

Below is a daily chart of SP500 pit session only. If tomorrows numbers are not liked by the market, i suspect we may see 1311. On the flip side 1342 and 1354 should provide resistance. Continue reading “Futures Trading Levels, Watch Out for Monthly Unemployment Report Tomorrow”

Futures Trading Levels, Resistance Levels To Watch Out For

Posted on by Ilan

Cannon Trading / E-Futures.com

I wrote yesterday:

“I got a short term sell set up on SP 500 as you can see in the daily chart below of the SP500 ( pit session or day session only)”

Well we got our first target right around 1338 during todays session. Next levels on the way down are 1329 and 1319.75

if we bounce, 1349, 1355 and 1367 will be resistance levels to watch.

Every day i hold a service, called live charts service.

The service includes my sharing of my intraday charts in real time along with possible buy/ sell signals, review of longer term time frames, discussion about money and trade management and much more.

The service starts DAILY at 8:30 AM central time and runs until 15:00 central time.

I share Mini SP, Euro and crude oil charts. Below you will see some of the signals we had today for crude oil ( which was a good day with 4 winners out of 6 signals….).

If you did not have a trial yet and would like a free 2 weeks trial, please email me or visit:

Daily Live Chart Service Continue reading “Futures Trading Levels, Resistance Levels To Watch Out For”

Futures Trading Levels, Short Term Selling on the S&P

Posted on by Ilan

Cannon Trading / E-Futures.com

I got a short term sell set up on SP 500 as you can see in the daily chart below of the SP500 ( pit session or day session only)

Potential levels if selling pressure resumes tomorrow for your review below as well as possible upside targets if this turns out to be just a small break from the recent rally…. Continue reading “Futures Trading Levels, Short Term Selling on the S&P”

Futures Trading Levels, 10-Year S&P Cash Index Chart

Posted on by Ilan

Cannon Trading / E-Futures.com

Wishing all of you a great weekend and successful trading month in May.

Since it is a new month, I thought it would be appropriate to share a monthly chart of the SP500 CASH INDEX for much longer term prospective….. Continue reading “Futures Trading Levels, 10-Year S&P Cash Index Chart”

Futures Trading Levels, Weekend Reading on Risk

Posted on by Ilan

Cannon Trading / E-Futures.com

Wishing all of you a great weekend and successful trading month in May.

Below is some worthy reading material for the weekend.

RISK

It is a four letter word. As traders it is something that we thrive on and dread. We chase and fear. We look for and look to avoid. It is RISK. Without it, there is no opportunity for profit. Without it trading lacks potential. With it, failure and heartache are the consequences when it is abused.

Risk itself is not a bad thing. When it is misused by traders, it becomes a problem. Controlled risk presents traders with exciting and profitable opportunities. Uncontrolled, it brings the end to the dreams and careers of many traders.

How should we as traders confront risk? The first step is to respect it. Realize the damage it can do to our account equities when it is abused. The two most important tools that we have to control risk are stops and position size. Oh, I know, you hate stops. We all do. We have all been stopped out at the high or low only to see the market immediately move in the direction that we thought it would. But without using stops on every trade that we enter, disaster will eventually prevail. I have a love/hate relationship with my stop orders. I hate to place them, but love how they save me from large, unacceptable account crushing losses. It is the same for all successful traders. Those foolish enough to trade without stop protection are risking disaster on every trade. Unless you as a trader have developed perfect discipline to exit a losing trade quickly, and according to your pre-entry criteria, stops are mandatory. And admit it, at least to yourself…..do you have perfect discipline? I think not.

The other critical element in controlling risk is position size. By this I mean the percentage of your equity that you are risking per trade. I do not risk more than 3.5% of my equity on any trade. Some traders are comfortable risking 5% of their equity. This amount for me is an amount of risk with which I am comfortable. It allows for aggressive trading, and it allows me to stay in the game ( financially and psychologically) even after a series of losses. This aspect of strategy building is often forgotten by the novice trader. These folks have dreams of “the big hit” or the monster trade that allows their account equity to soar to heights unimagined by mere mortals. The problem is, oops, what if you are wrong? This type of trading/thinking is out of control. It leads to broken dreams and short careers. You must always remember that this is a highly volatile, sophisticated business. Treat it as such. If you want to gamble, jump on an airplane and visit Las Vegas.

The futures markets are highly leveraged, as we all know. Those traders that abuse risk by not respecting its power will eventually join the long list of former futures traders. Risk must be treated like a beautiful, intelligent woman. Treated with respect, wonderful things can happen. But, abuse it, or disrespect it, and suffer the consequences.

As a futures trader you have to embrace taking risk. Understand its impact. Respect it. Stay in control of it. Develop a trading method that makes risk an asset to your account instead of an enemy of your account. Risk/reward analysis is an important part of our everyday lives. Can I make it thru the intersection before the light turns red? Do I need to re-apply my sunscreen? Should I have one more beer before driving home? In trading, always keep in mind your risk versus the reward. A 50% gain in your account is not equal to a 50% loss of equity. A 50% winning trade puts you up by one half. But a 50% loss means that you have to double your equity to get back to your starting point. Respect your risk levels. Trade only using a risk level that you, personally, are comfortable with.

Rome wasn’t built in a day. Neither will your account be built in a day, or a week. Respect risk. Enjoy it’s benefits and your trading in rest of this year and in 2011 will produce profits and satisfaction. Enjoy the ride.

IMPORTANT PLEASE NOTE: TRADING COMMODITY FUTURES AND OPTIONS INVOLVE SUBSTANTIAL RISK OF LOSS. THE RECOMMENDATIONS CONTAINED IN THE LETTER IS OF OPINION AND DOES NOT GUARANTEE ANY PROFITS. THERE IS NOT AN ACTUAL ACCOUNT TRADING THESE RECOMMENDATIONS. THESE ARE RISKY MARKETS AND ONLY RISK CAPITAL SHOULD BE USED. PAST PERFORMANCES ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

For more on risk, trade management, trade set ups, technical indicators and more, sign up to have 2 weeks complete free access to my daily chart service where I share charts, signals, trading philosophy and more. Sign up at:

Daily live chart service Continue reading “Futures Trading Levels, Weekend Reading on Risk”

Futures Trading Levels, End of Month Statistical Trends

Posted on by Ilan

Cannon Trading / E-Futures.com

Last trading day for April is tomorrow…..while the last few months have shown that statistically, the market goes up the last couple of trading days, I am going to take a stab and look for the market to pull back if we can break below 1352 during the pit session….

60 minute chart of the BIG SP 500 ( the “pit session” ) for your review below with potential levels to watch if we do pull back. On the way up , I have 1362.75 as first resistance , followed by 1372. Continue reading “Futures Trading Levels, End of Month Statistical Trends”

Futures Trading Levels, Mini Russell 2000 Leads Indices; Newsletter

Posted on by Ilan

Cannon Trading / E-Futures.com

Weekly newsletter along with free access to SP500 squawk box at:

Cannon Trading Inc. Weekly Newsletter.

Daily chart of mini Russell 2000 ( which I currently see as the leader of Indices as far as price action) below with potential upside and downside levels: Continue reading “Futures Trading Levels, Mini Russell 2000 Leads Indices; Newsletter”

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.