Emini S&p Trading: Appreciate Your Capital Abilities

Everyone involved in the financial markets needs to know their limits

. You must understand how much you can risk each trade and why you can only risk that much. You need to sit down before you start and come up with a plan that will allow you to see that over exposing yourself via risk appetite or over sizing can lead to very negative events. Money management is what will keep you in this game for the long haul. Avoid dealing with the issue and you are doomed to suffer the consequences no matter how good a trader you are.

Leverage in the future markets is often misused and misunderstood by novice and veteran traders alike. There are positives and negatives to the system and, without knowledge of the full capabilities of what over exposure can result in, traders can put themselves in harms way without even realizing it. E-mini markets tend to move very quickly and if a trader isn't on top of their money management they can see their entire trading account wiped out in a matter of minutes.

How can prepare for long term profitability in the e-mini futures markets through proper money management awareness?

1. Conservative Sizing

Never trade more contracts than you can afford to. It sounds incredibly obvious but it is an idea that is foreign to most. Futures brokers will often tell you that you can trade x amount of contracts based on your account size but that doesn't mean you have to trade that amount. Start small and get comfortable with the market and the system. Allow yourself time in the markets to build up some experience and skill before trading large amounts of contracts at once.

2. Stop Placement

Stops are crucial for day trading, especially in the e-mini markets where price action can produce violent price swings. Stops allow you to exit a position without actually entering a new order. If used properly they can add discipline to your entries as well as your exits. Stops allow you to focus on your trading rather than worrying about the worst case scenarios should something go wrong.

3. Risk Appetite

Being realistic about your returns will help to gauge how much risk you should be willing to take on each individual trade. Know your risk tolerance before you place any trades. Focus on becoming profitable with small trades and then slowly ramping up your sizing until you are comfortable with the risk : reward ratio. Each trader and each account size is different and there is no golden rule in risk tolerance levels. Remember to start small and work your way up. There is no need to jump in head first and get burned right away, the market will be there tomorrow.

Knowing your limits will help keep you out of trouble. Position sizing, stop placement, and risk awareness are just a few things you can look at to get a feel for how in control you are of your trading future. Money management is what will set you apart from others in the market so make sure you know what you are doing before you get started.

by: Deann Graham

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