Trading Futures For Newbies...Learning To Be Realistic


Trading is not an ATM Machine. It takes time to learn to trade, persistance, and dedication. Carpenters do not learn about wood in a day. Pianists do not learn Mozart sonatas in a couple of hours. Learning to trade is no difference. There will be time and effort you'll need put in order to become proficient. The more time allocated to learning, the better the chances for long term success.

Too often small investors new to the game of trading focus all their attention on "making money". They bring up spreadsheet programs showing that if they keep multiplying their earnings, in no time they will be making tens of thousands. Instead of focusing on the task at hand of becoming a proficient trader, they concentrate their efforts on how they are going to become millionaires overnight.

Another problem for newbies is given the amount of money that they open their accounts with, they're expectations of how much
they are going to win often is just unrealistic. With trading futures, newbies can open an account with $2500. $2500 will not turn a newbie into a millionaire in a couple of days of trading. Instead of trading smarter, they start to overtrade, expecting to double the $2500 every other day, if not every day. Rule of thumb with professional traders...once you make 10% return on investment in one day, stop trading. With $2500, that equates to $250, not $2500.
Again, newbies pull out their spreadsheets, and starting with $2500, they look to double their investment in a day or two, over and over and over. So the $2500 becomes $5000, and the 5000 becomes $10,000, and the $10,000 becomes $20,000 and quickly they arrive at $1,000,000 in under two months. Doubling a small investment every day is simply unrealistic.

The difficulty for newbies here is they have not allocated any time for learning to trade. They are so involved with spreadsheets and making money, they failed to allocate any time to learn to trade. Basically, they fail to develop a Plan B in case their Plan A doesn't work.

This same mentality can be found in casinos with gamblers. A gambler wins a jackpot and instead of walking away from the casino, he puts the winnings right back into that same machine, all the while thinking....I made $100, I am sure I can make $200. After all, I am playing on the casino's money!

Newbies into the game of trading, whether they are buying and selling stocks, emini futures, currency trading with Forex, etc. must be realistic in what they can hope to achieve right away. Most newbies start with a simulator and make no money at all until they get their feet wet and understand the game. This way, although they don't make any money, they don't lose any either.

The best analogy for entry level traders is someone who opens a restaurant. For the first few months, it is trial and error. You don't know what food your customers will want to eat. You don't know how many customers you'll have. You don't know the hours to keep the restaurant open, etc. At the beginning, there is a lot of wasted food for lack of knowledge. But as time goes on, the menu becomes refined. The quantity of food to cook becomes refined. Even the hours of operation become refined. And the amount of wasted food becomes less and less.

Newbies into the game of trading are opening their own restaurant. Eventually they will learn just how much money to invest, what a realistic rate of return to expect, how many trades they need to do to achieve that rate of return, etc. But until they get their restaurant refined, better not to spend time with spreadsheets, doubling up winnings every few days. Put your attention on the task at hand, learning to become a proficient trader.

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