Blog | StoneX Futures

3 Trading Skills Every Futures Trader Should Possess | StoneX

Written by StoneX | Feb 21, 2018 6:00:00 AM

In the contemporary financial environment, becoming a futures trader is relatively simple. All a trader needs is a computer, internet connection, and some risk capital. Of course, engaging the futures markets successfully is another matter altogether.

Studies have shown that upwards of 75 percent of individuals new to the marketplace eventually quit within two years. The most commonly cited reasons for the high failure rate are undercapitalization, emotional behavior, and the inherent complexity of the markets.

With such high washout rates, is becoming a successful trader even possible? The answer is yes. Through comprehensive preparation and the mastery of a few trading skills, an aspiring trader may indeed achieve longevity in the marketplace.

1. Analytical Skills

The futures markets are rapidly evolving, hypercompetitive arenas. For a futures trader, being able to observe what is happening and act in a timely fashion is an absolute necessity.

Strong analytical skills are an indispensable part of futures trading. Fluency in the following areas is extremely valuable:

  • Technical analysis: The ability to read charts, price action, and apply indicators in real-time are prerequisites to engaging the modern futures marketplace.
  • Fundamental analysis: Having a basic understanding of market fundamentals can give insight into the factors that drive price action as well as the motivations of competitors.
  • Arithmetic: Computers automatically provide a wide variety of complex calculations for trader consumption. However, strong numbers skills come in handy when having to derive profit targets, stop losses, and position sizing on the fly.

It’s important to remember that a trader doesn’t need to be a card carrying member of MENSA to trade futures. A vast majority of the necessary skillset may be acquired through hard work and experience.

2. Emotional Control

A multitude of factors comprise the makeup of an individual’s psychology. Personal values, self-esteem, and sentiment toward money can all influence performance. Being in complete control of one’s emotions while trading is an integral part of successfully interacting with the marketplace.

Many of the pitfalls in futures trading are correlated to personal psychology. Learning how to actively manage your psychology can increase the odds of profitability substantially:

  • Honesty: Regular and unbiased self-performance assessments can help to eliminate future mistakes.
  • Suitability: The adopted trading style must be appropriate for the personality involved. Through identifying your strengths and weaknesses as a trader, you can find a suitable method to optimize performance.
  • Knowing when to stop: Knowing when to take a break from the markets can be the most profitable skill a trader possesses. Overtrading, aggressive risk-taking, and haphazard money management are all products of emotional trading. Often, a brief respite can mitigate these issues.

Nothing will blow out a trading account faster than emotional trading. Developing the proper mindset and learning how to manage one’s own psychology can be a life-saver in the face of challenging markets.

3. Computer Literacy

The modern futures marketplace is predominantly digital. Participants from around the globe enter the markets on a daily basis remotely, via internet connectivity. Without a working knowledge of how computers and software function, it can be difficult to trade.

Two areas in which it pays off to be technologically savvy are:

  • Computer and software selection: Securing the proper hardware and software platform for the type of trading endeavor is crucial to sustaining an edge in the marketplace.
  • Troubleshooting: Problems with technology will arise. Being adept at troubleshooting issues regarding computer performance, internet connectivity, and software compatibility exponentially reduces the time out of market due to technical difficulties.

A background in programming or information systems management is useful, but not necessary to be a futures trader. Advanced technical support resources are available around the clock online, typically furnished by the brokerage. However, basic computer literacy gives a trader the ability to diagnose problems quickly and minimize any client side trade-related latencies that may arise.

Putting It All Together

Obtaining adequate analytical skills, emotional control, and computer literacy can be an arduous process rooted in experiential education. In order to speed things up, check out StoneX’s broker-assisted futures trading options. A market professional is ready to give tips and advice on how to get up-to-speed in the least amount of time possible.