Top 3 skills for the futures trader
It is quite easy to become a futures trader due to rapid development of information technologies and also constant improvement of the trading and analytical ATAS platform. Everything you need is a computer, Internet access, free download of the platform using the link below and trading capital. Easy, isn’t it? Nevertheless, it is much more difficult to achieve success in trading, which would require a lot more effort.
Different studies in the sphere of trading tell us that more than 75% of beginners that came to financial markets leave during the first 2 years. They say that the reasons for this high percentage of failures are: insufficient size of the trading capital, inability to cope with emotions during trading and relative complexity of financial markets.
You may ask: is it at all possible to become a successful futures trader? The answer is yes. Beginner traders can make their first steps to the long-term success in the futures market from mastering three basic skills, which we will discuss in this article.
In this article:
- Analytical abilities
- Control of emotions
- Computer literacy
The futures market is a rapidly changing battlefield where severe competitive battles break out every day. It is absolutely necessary for a futures trader to have a possibility to monitor the market developments and quickly react to changes in the market situations. Efficient trading in the futures market is impossible without strong analytical skills and a deep knowledge of its grounds is extremely valuable:
- Technical analysis: is the ability to analyze price charts in real time with the use of technical indicators. As a rule, the technical analysis of the futures market is the first stage, which is passed by beginners on their way to professional growth.
- Volume analysis: is much more than just charts. Visual analysis of the order flow, cluster analysis and volume market profile allows a trader to look at the market from inside and understand what drives it. The professional trading and analytical ATAS platform, oriented at the order flow analysis (Time And Sales) and Level II data (Depth Of Market or Smart DOM), will become a reliable assistant for a trader. Proficiency in this type of the futures market analysis is a must for professional long-term profitable trading.
- Fundamental analysis: is understanding of the main principles of the futures market operation, which would help a trader to cast light on the factors which have an impact on the price behaviour and also motives of the market participants.
- Arithmetics: computers make a huge amount of calculations, which a trader uses in trading. Nevertheless, a trader should be able to quickly calculate the target indicators of profitability, the stop loss size and optimal position size.
It is important to remember that a trader doesn’t have to be a member of the Mensa intellectual society to trade futures. He can develop a bigger part of necessary skills through hard work and practical experience in the futures market.
Control of emotions
Many factors identify psychology of every person. The system of values, self esteem and attitude to money influence efficiency of every trader. Control of his emotional state by a trader during trading is an integral part of his success in the futures market.
Many mistakes made by traders in the futures market are directly connected with the psychological aspects of his personality. Learning how to actively control his psychological state can significantly increase his chances for success:
- Honesty: a regular and impartial assessment of the trading results will help a trader to avoid making the same mistakes.
- Compatibility: the selected trading style should be compatible with the trader’s personality. A trader will be able to find an appropriate trading method for achieving optimum results only if he understands his own strengths and weaknesses.
- Ability to stop in time: perhaps the most valuable quality of a trader is understanding of when he should have a break from trading. Outselling, aggressive and risky trading on the edge of the trading capital capacity and its ill-conceived management are the results of emotional trading. Often even a short break would be able to smooth down negative consequences of these problems.
Nothing eliminates the trading capital as fast as emotional trading does it. Development of certain qualities and ability to control emotions could become a real lifebuoy for a trader in the raging chaos of the futures market.
Perhaps this skill sounds as self-evident, since modern life is closely connected with computers. However, it is a must in this list and here’s why.
The modern futures market is predominantly an electronic environment. Every day futures traders from all over the world come to this market remotely through the Internet. A trader can face difficulties without basic knowledge of how computer hardware and software function.
There are three spheres where your computer literacy will definitely help you:
- Selection of a computer and trading platform: a smoothly running computer and the advanced trading and analytical ATAS platform, one of the multitude of advantages of which is an excellent trading module, have a decisive importance for successful competitiveness in the futures market.
- Troubleshooting: noone is insured against sudden computer failures. Learn to solve the problems, caused by low computer capacity, bad Internet connection and software incompatibility, by yourself. It would help you to significantly reduce the time of absence of access to the market trading.
- Order matching: it is well known that the ATAS platform not only aggregates order flows but also presents them in a clear visual form in the chart. Nevertheless, understanding of the market mechanics, how orders move and algorithms of order matching in the modern futures market is necessary for long-term success in trading.
Understanding of the last item is especially important, since, according to many sources, the use of algorithmic trading systems (ATS) significantly increased in the futures markets for the past 10 years. As of today, they take approximately 55% of the whole trading volume of the US stock market and about 40% of the whole trading volume of the European stock market.
Their presence also significantly increased in the futures market. The Commodity Futures Trading Commission (CFTC) established that during the period from October 2012 until October 2014 the algorithmic trading systems were present in at least 80% of the trading volume of currency futures; 67% of the trading volume of interest rate futures; 62% of the trading volume of stock futures; 47% of the trading volume of metal and energy futures; and 38% of the trading volume of agricultural futures. ATS presence also increased up to 67% in the trading volume of 10-year US Treasury Bonds and 64% in the trading volume of eurodollar futures.
Experience in programming or of work in the IT sphere will be useful but is not mandatory for becoming a successful futures trader. For example, if you are a user of the trading and analytical ATAS platform our highly qualified specialists of the support service are ready to answer your questions at any time. Moreover, any professional broker, with whom you open your trading account, should also have a qualified technical support service, which is always ready to help you. Nevertheless, basic computer knowledge allows a trader to quickly detect a problem and minimize possible time delays which may have an impact on the speed of execution of a futures trade.