Futures Contracts

When buying a trading eBook it’s advisable to make sure that the basics and finer points of the trading method or system are covered. Occasionally some of the basics are left out.

Also when buying a trading eBook be sure to realise that it may not tell you the whole truth about running your profits. The truth, although different to what they often say is an easy principle to understand and use.

So as well as the finer points of ‘trailing stops’ and if you should ever cut your winners from running, we’ll also look at exactly what the terms resistance, support, long and short mean and where their definitions come from.

We will also cover briefly what your broad trading goals should be, from when you are a beginner to a fully fledged professional trader.

Of course you should always cut your losses sooner rather than later. The more you let losses run, the more painful it becomes to cut them. Remember losses are a part of trading for even the best traders in the world.

Obviously the aim is just to make more than you lose. Try to win every month overall at first. Then aim to be ahead every week and finally try to string together as many winning days in a row as possible.

If your trade looks likely to move off side (to losing) even though it’s currently profitable, it can be wise to close the trade out sometimes. We’ll look into this more in a moment.

So if you had a ‘long position,’ in that you bought first, just sell the same number of contracts to close the trade.

In case you don’t know already, a ’short’ position means you have initially opened trade by selling first. It’s called a short position because the profit potential is less (shorter if you like) than a long position as when you sell initially, the price of the security or currency pair can only go down to zero, however unlikely that is.

Whereas as if you buy initially, giving you a long position, hypothetically there is no limit to your profit potential.

Operating trailing stops on your trades will keep you out of trouble often, allowing you to lock in at least a tiny profit on winners as opposed letting them go to break-even or a loss.

When buying a trading eBook you should make sure that it deals with where to place your stops.

There are two broad types of stops. Closing and opening stops and it means planning to trade in the future at a worse price than the market currently offers. That might sound strange. Why would you want to do that?

Well a key price level if reached might be above the market, for example if it breaks through a ‘resistance’ point you might expect prices to break out and travel much higher.

When buying a trading eBook it will probably tell you the basics of resistance and support.

But just in case it doesn’t explain these simple but crucial terms, we’ll cover them now:

Resistance is a level above the market price which can be a level that prices touched in the past many times but didn’t break through. Resistance can also be caused by key simple moving averages of prices that many people take notice of.

The same is true of ’support’ levels, but in reverse, so these are levels below the current market price.

Anyway back to the point on cutting and running your profits when employing a ‘trailing stop.’

A stop loss does just that, it stops losses. So it could be that if you’re in a long position, the trade will be closed out if the price goes down to a certain level to cut your losses.

So what is a trailing stop?

Put simply, a trailing stop moves in only one direction as the price moves and if the price starts to move against your position, the trailing stop will not move.

So for example, if you set your trailing stop 15 ticks (for futures) or pips (for FOREX) away for something you bought and if the prices moves up, the trailing stop also moves up. But if the price starts to move down, the stop does not move down.

Do you see the power of this? It locks in any profit if the trade moves in your favour and then against you.

So it definitely makes sense that when buying a trading book for trading stocks, futures, FOREX or any security in fact, to look into whether it uses trailing stops.

Even if it doesn’t, you can always adapt your trading plans from the trading eBooks and books you’ll buy to take into account and use trailing stops.

Keep analysing your open trades in your head and on a notepad with a pen and paper. What are its ‘pros’ and ‘cons?’ Just list them. Should you scale the size of the trade down and take a partial profit? You shouldn’t need to if you’re position size is not too big in the first place.

Anyway, price action should be your main indicator as to whether to stay in a trade in my opinion, so let the trailing stop do its work. It will take the emotion out of trading.

Otherwise: ‘If in doubt, get out!’ There will always be plenty of new opportunities for profit.

By investing in yourself and your future trading by buying a trading eBook or by buying a few trading eBooks, you are arguably making one of the soundest investments you can make in yourself.

Finally, by buying a trading eBook you will almost definitely save yourself money in the markets and it should help you to possibly make more than a good living if you’re persistent. Just keep learning to trade every week.

By buying and reading trading eBooks you’ll soon realise that successful trading methods are easy to grasp and that actually wise money management and controlling your emotions are key to your success also.

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