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Find a Trading System That Has Performed Well and Latch On

Now here is another surefire way to lose your shirt. The time to go with a winner is when it has had a string of losses. Unfortunately, this is not the way most traders make their decisions. The temptation to go with a system or money manager is greatest when their performance has been outstanding, when they have attracted the most attention by their performance. I suggest that you find a good performer, wait until it has experienced a good-sized decline, and go with it. However, please note that your incentive to get on board will not be very high when the decline in performance is in process.

Quit Your Job, Withdraw Money from the Bank, Get a Computer, Subscribe to a Quote Service, and Begin Trading

I have seen more traders lose money this way than any other way. Futures trading is a profession. It takes time to learn the techniques, and it takes experience to implement those techniques successfully. There is no substitute for actual trading experience. It never ceases to amaze me how many doctors, lawyers, and engineers quit their otherwise stable and lucrative professions to take up trading. Even more amazing is the sad but true fact that these professionals think they can make money by taking a few courses or seminars, or by reading a few books. When their efforts meet with losses, they are surprised that they have failed. What they have failed to understand is that futures trading is not like being a doctor, lawyer, or engineer.

My advice is simple. Don't quit your job. Don't buy expensive quote equipment or computers. Don't fool yourself into thinking that the right system, the right computer, or the right broker will make you successful. Trial and error, experience, self-discipline, and consistency will make you more money than will expensive equipment.

Use Spreads to Avoid Losses

This may seem like a sophisticated strategy. In actuality, it's just another way of avoiding a loss until it gets big enough to cause serious pain. While there's nothing wrong with trading spreads as spreads, there's everything wrong with spreading a position to avoid a loss. The only thing this will do for you is to lock in the loss. Often both sides of the spread will work against you, and you will end up increasing your loss. The time to take your loss is when the time to take your loss has come; it's not time to spread the position to avoid a loss. When used appropriately, spreads are good vehicles that may be used very profitably. However, when used to avoid a loss, they can be deadly.