Trade Management + Futures Trading Levels 3.01.2024

Trade management is more important than Market Analysis….

I have done this so many times before, my colleagues tell me when it happens to them as well as some of my clients….You have the perfect read on the market. The market actually ends up doing what you thought it would and in a BIG way…yet somehow you managed to LOSE money despite your perfect analysis. To me this is sometimes more frustrating than having a bad losing day.

What happened?

Poor trade management, that’s what happened.

Yes, reading the market well is a much needed quality if you plan on making money rather than contributing donations to the market but more important is how you manage the trade / position once you read the market. Much easier said than done, especially after the fact but here are some tips that I am hoping will assist you in the next time you have a good market read.

By the way, the reason to this quick trading tidbit is the stock market rally we saw today in stock indices. Both my colleague and I “had the right analysis” on this possible rally yet he managed to lose and get stopped out twice while I took a small piece of the rally BUT not nearly as much as I should have….

1.      You don’t have a crystal ball. To think you can buy an ES contract in this volatility and use a 2 point stop in hopes of making 20 points profit is a very low probability event…you would need to buy it at the PEREFECT time for this to happen. Point is, with higher volatility you need to use WIDER stops to give yourself a chance. That may mean using SMALLER trade size.

2.      If you are able to, share your read with another trader, it may provide you with a better perspective just by sharing.

3.      If you think there is room for a big move or what we call a “runner” – be prepared to for the pullbacks. Use multiple time frames to gain a better perspective and hang in there for the big move, if this is what you think can happen.

4.      If you have enough risk capital, try to use multiple contracts, example buying 2 rather than 1. Taking profit on the first part of the position will help you relax and look at what the market is really telling you rather than what you would like it to say. It helps reduce both the fear and the greed.

5.      “Plan your trade, trade your plan”

Again these are just some short pointers, written quickly after today’s session in hopes of helping you when you face a similar situation.

Plan your trade and trade your plan

Daily Levels for March 1st, 2024

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* 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.