Professional traders approach trading futures

Professional traders approach trading futures

Professional traders entering transactions in a different way compared to the average person. Professional trader entering transactions in a similar way to a martial artist how to develop their skills as a warrior. They first identify their trading principles, which they traded in the market's overall policy. Then they follow the doctrine of development strategies to achieve long-term success. Finally, the professional trader tactics developed as a means of implementing this strategy.

Most new traders simply learn a strategy or tactic did not fully understand the doctrine behind its development. Without this knowledge, they will lose confidence in the strategy as soon as losing streak occurred. Professionals understand that loss is just the cost of doing business as a merchant.

Doctrine

Doctrine is simply a set of broad and general beliefs. Different types of transactions, including the doctrine trend, arbitrage, fundamental valuation, to become a successful trader first step is to determine which is best suited for individual transaction doctrine.

An example of the doctrine in the martial arts is the art of taekwondo. This subject focuses on the use of feet as the main weapon, rather than hands. Therefore, fighting the development of strategies and tactics to employ in the foot. This type of martial arts opponents will try to keep a distance, your feet can do the most damage with a variety of kicks. On the other hand, specializes in Wing Chun martial artist is more focused on the use of the hands, like playing closer.

In the transaction, the individual must determine what type of doctrine is most suited to their personality. Whether they are able to withstand prolonged losing streak and trade trends to follow you? Or, they are more willing to analyze supply and demand, in order to determine the potential of a commodity or the market value? For the purpose of this article, we focus on the trend € ™ LL following principles.

Systematic trend following are the most common application of the longest running commodity trading advisor (CTA) doctrine. The most famous of these traders is the Boston Red Sox owner John Henry. Henley Management client funds since 1982, his shop until closing at the end of 2012. In business one of the largest commodity trading advisors, Campbell company is headquartered in Towson, Maryland, currently manages assets of more than three billion dollars. Campbell client assets under management, since the early 1970s, mainly using the following strategies in the futures market and money market trading trend. Other notable trend followers, including Richard Dennis and Eckhardt pointed out that they trained a group of traders known as William Dunn, Ed Seykota, and Salem Abraham, sea turtles, to name a few.

Trends, when it comes to trading is simply buy high and sell high, or low to sell, buy back low. Our idea is to use the background from time to time have long-term, positive absolute returns that occur within the time several trends in the market. When the market is no trend, these strategies often result in losses. In an effort to produce more consistent returns, then the CTA will be of different lengths grasp long, medium and short-term trends in the trend tracking strategy.

Below trend yield good returns in the long run, but it is a difficult strategy to employ a number of reasons. First, the industry's most ultimate loss. The typical trend following strategy, there will be winners in the industry only 30% to 40%. This makes it for most people, psychologically difficult to track trends in hiring strategies. Secondly, the most fashionable follow the strategy is lost, there is no trend, they also lost when major reversal in the trend, never quit, because these strategic positions absolute high or low a long-term initiatives. Finally, the trend following strategies often require a considerable amount of money to deal with the appropriate risk limits. This type of trading strategy, too little money greatly increases the risk of bankruptcy.

Tactics

How to understand trends in the futures market works, it is necessary to understand some of the concepts behind the doctrine. These include some of the game's concepts, such as the ruins of marginal probability and transaction risk.

Risk of bankruptcy

Gambling, bankruptcy risk is the risk that you will lose all the money due to the string the possibility of loss. For example, consider a dice game, every time we throw 2 or 3, we win $ 2 for every $ 1 we bet, and every time we have introduced a 4, 5 or 6, we lose $ 1. The odds are four volumes, we should be up $ 2, because we should have two winning roll and two-losing roller. So how much should we bet on each roll, if we have in our pockets $ 20 do?

Although the game odds are in our favor, we can still lose all our money. For example, if you have a $ 20 bet $ 10 each, you only need to lose your first two volumes, you are out of money. In fact, the probability of this happening is 25%!

Larger bet size, the greater the risk of bankruptcy. Actually increase the risk of bankruptcy is almost geometrically increasing bet size. This is why many gambling addicts lose. They do not understand the concept of the risk of bankruptcy.

Risk Management

Risk management is simple in order to continue to manage transactions through a losing streak the size of the market risk. In the futures market, the market is usually in the range of movement choppy trading. These periods resulted in many losing trades trend followers, no matter what method is used, they enter positions. It is therefore necessary to develop risk management strategies, expected loss in the period in which efforts to maintain adequate funding to develop a larger trend, when it comes together.

Traders often use the risk management strategy is based on the size of the portfolio and their trading market volatility.

Trade and edge

In the long run, the work of trading strategies have what is known as the edge of gambling. An edge refers to a systematic advantage over an opponent. Most casinos offer casino games in a long-term advantage over its customers.

In the transaction, the edge is an advantage of available statistics, according to the market's behavior is likely to occur again in the future. Determining the edge of the positioning of the entry point, where there is a probability greater than normal, the market will be required within a time frame of the movement in a particular direction. These entry points, and then paired mobile design entry point, exit point to make a profit.

Edge trading system a combination of components from three selected, the input and exit signals. A strategy that combines these three components will be a system that is only open for a range of breakthrough in the S & P 500 index strategy, if the stock price above its 20-day moving average of an example. If prices break through the first 30 minutes of trading over high, it may enter the location and position of exit end of the transaction, if the position is profitable.

Trend-following strategies in different forms, such as moving averages, channels breakthroughs and pattern recognition. In all cases, the idea is to use some duration trend. Some strategies seek to exploit the trend may last a year, while others tried to take advantage of a shorter duration, such as a few days trend. The strategy will generally be suitable for businessmen employ their personality.

Tactics

Once the trader has developed his overall trading strategy, he needs to execute strategy, develop appropriate tactics. Tactical generally involves the execution of the industry itself. For traders, managing several million, is to be careful execution of orders in order to reduce the cost of delays. Smaller traders can often get easily use market orders, the use of trading strategies. However, large traders will often use a variety of order types, such as market and limit orders, may often use several different brokers.

By the famous turtle traders approach is to whipsaw technologies. Basic Turtles strategic trade breakthrough. These businessmen are aware some industries will be a false breakout. In other words, the market may break a new high, but then quickly reversed. Therefore, efforts to reduce amount of the loss, turtles will employ, where they will exit the industry's position, if only a little bit of their mobile technology. For example, if prices break below its normal stop loss of 200, they will exit the export price of 50 cents or less, and continued use of this tactic until the final breakthrough in the direction of the market continue, or fail completely.

Another approach by the turtle is piecemeal, stop-gap way into position. They may break into a position just below the price, the right price, and then a little bit above the price. This will help them to reduce their overall slippage will help them ahead of other similar traders expect a breakthrough.

Conclusion

Professional traders close to the market, and has broad set is called a doctrine of faith. Trend following is one such doctrine. In this theory provides a trading strategy, traders with long-term edge, enabling them to profit from the long term. The trader will use a variety of trading strategies to implement this strategy.

Throughout the article mentioned in the turtle were a group of mid-1980A € ™ training by Richard Dennis and Eckhardt traders. At the time, Dennis was worth more than 200 million U.S. dollars. Dennis and Eckhardt instill turtles below trend, can generate substantial profits, the belief in the futures market. Then, they provide turtles and strategies to capitalize on these trends, and teach tactical implementation of these trading strategies.

This is the basic process that every trader must commit, in order to experience long-term success in the market. This may take a few years through the process, but it is absolutely vital to the success of individual potential.