Futures Trading and Risk Management

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As sweet as futures trading may appear, you'd agree with me that the chances to get rekt will be higher if the trader doesn't have a proper and good risk management plans and strategies. Risk management is a very important skill every business person should have because it cuts across every thing finances. Risk management helps one to reduce the risk and chances of experiencing losses in the markets or in any business.


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Oftentimes, we hear of people getting liquidated while trading futures of which I am a victim of and it is usually not a sweet experience, believe me. No one wants to be liquidated because it comes with a lot of pain and could destabilize the victim. But suffice me to say that, experiencing liquidation while trading futures is a function of poor risk management. A person who manages his risk level very well will always be very far away from being liquidated unlike the other who trades recklessly with a unique trading system, strategy or pattern.

Why do some persons get liquidated?
First is greed! Greed is one major reason people lose their funds in futures. Truth is, by the time you want to make all the profits in one day, you'll definitely make rash decisions and enter into wrong positions that will end up recking you. Some persons just want to always make over a 100% or 200% in all their trades. Some tend to use too high leverage level as well as trading with a large percentage of their balance.

All these are poor management of risks and instead of growing your funds, it will lead you to incessant and bad losses. As a futures trader, these are some of the risk management strategies you should possess:

  • Don't trade too often: Sometimes, you just have to sit and watch the market move. Sometimes, you just need to take a break especially when the price movement is very volatile.

  • Maintain a moderate margin when placing a trade: For me, 10% is too high a margin for a single position.

  • Don't open too many positions!

  • Remember to use stop-loss

  • Don't forget to take profits when you see them.

  • Have a trading pattern; don't trade recklessly and haphazardly

There are lots of ways we can manage our financial risks and it's important to observe them if we must grow our finances instead of losing the ones we have.

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Well said. One thing I also noticed is that greed is preventing people to even have that risk management

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To avoid losses, one has to always put his greed in check