Investing Rules to Success for the beginner or experienced options on future trader

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Discipline yourself with a predetermined game plan before you enter in a trade. At Mercury Capital Managment, specializing in limited risk option selling strategies for the individual investor of stock indexes, futures and commodity options. Research and educational support offered to the beginner or experienced trader of futures and options.

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87% or more individuals who trade commodity futures lose money doing so.

RULES TO SUCCESS

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Discipline yourself with a predetermined game plan before you enter in a trade. At Mercury Capital Managment, specializing in limited risk option selling strategies for the individual investor of stock indexes, futures and commodity options. Research and educational support offered to the beginner or experienced trader of futures and options.

1. DISCIPLINE YOURSELF WITH A PREDETERMINED GAME PLAN

This may be the most important of all, and the hardest "rules to success" to follow. Before you enter in a trade, you should know the potential risks and rewards of the trade. Set a predetermined amount to risk in any one particular trade. Without a game plan you will be forced to constantly react to the whims of the marketplace.

2. DON’T PUT ALL YOUR EGGS IN ONE BASKET (OR DON’T PUT ALL YOUR MONEY IN ONE TRADE)

Rule #2 to Success is Don’t make the mistake of putting all your capital in one market or one trade. Many successful traders recommend keeping at least three times as much money in your margin account than what is needed for any one trade.

3. CUT YOUR LOSSES SHORT

One of the worst mistakes new traders make is failing to admit when they're wrong. Successful, disciplined investors try to take losses while they're still small, and then wait for a better day. You and your broker must decide when to get out of a losing trade. It is very hard to come back from a losing trade that “knocked your socks off”. The name of the game is to be trading for the long term.

4. DON’T BET THE RANCH (OR THE HOUSE, CAR OR GROCERY MONEY EITHER!)

Futures trading can be very risky, so don't fund your trading account by committing money which, if lost, could throw you into bankruptcy. Instead, fund your account with money to be used only for investing and would not change your lifestyle if lost.

5. TRADING IS A TOOL USED TO GET YOU TO YOUR GOAL

Profits go to those who act, not those who react. Decide your entry and exit points, and your profit objective, well before you place a trade.

6. BALANCE PROFIT POTENTIAL WITH RISK INVOLVED

Would you risk 1 million dollars to make 1 dollar? I hope not. Always keep in mind what risk is involved to make the potential profit in a particular trade. When the risk involved really tips the scales, it might be time to exit the trade.

7. DON'T LET EMOTIONS OVERRULE YOUR BRAIN

Don't hope for a move so much that it clouds your vision. Hope is a wonderful virtue in many areas of life, but it's often an enemy to futures traders. Always keep objective.

8. SHOP THE ODDS

Smart traders look for market conditions where risk is low and profit potential is high. For example, if a market is trading near historical lows, it would usually mean there is far more potential for a bullish move than for a continuation of the down move.

9. DON'T TRADE TOO MANY MARKETS

Many beginning traders feel they must stay on top of all markets, even though they only trade a few. That can quickly lead to paralysis from information overload something even experienced traders can suffer from. Stay focused on a few markets to trade and master them.

10. DO YOUR HOMEWORK

There is nothing more critical to the process of making money in the markets than fact-based knowledge of what's going on. Before you place a single trade, you should know the underlying trend, direction, what triggered it, the current trading range, what signals you should be looking for, and what your trading objective is. All of these require information that's readily available from a variety of sources. So do your homework; according to our top traders, it always will be time well spent.

The rules of success are meant to be used as a informational guide to help in enhancing trading results and in no way are they statements for guaranteed success.

There is a risk of loss trading futures and options. Past performance does not necessarily indicate future results. Trade with risk capital only. Commodity trading is not appropriate for all investors. Read our full disclaimer.