This list of tips and pointers may help new traders improve their trading experience in futures markets. Even longtime traders may benefit from revisiting this list from time to time, since we all know how easy it is to form bad habits.

So, whether you’re just beginning to learn how to trade futures – or a sophisticated, experienced veteran – we encourage you to read this list carefully.

These trading suggestions will never go out-of-date and will be just as valid in 10 years as they are today!

Plan in Advance

The number one tip on our list simply can’t be repeated often enough:

Developing a trading plan in advance helps you minimize situations where you’re forced to make important decisions when you’re already in the market, with money at risk, and when natural human emotions (fear and greed, in particular) can influence you. You need to make important trading decisions in a calm, rational way – not under stress and pressure. In a nutshell, plan in advance.

Know When to Exit a Trade

At the risk of being at least partially repetitive, always know the point at which you’ll throw in the towel and exit a trade that’s simply not working as you’d hoped. Of course, we all enter new trades with the hope and expectationn that they’ll be profitable. But the fact is, futures trading involves risk, and not all your trades will be moneymakers. So decide on your bailout plan before entering the market.

Set Triggers to Exit A Position

Always trade with protective stop-loss orders.

Charles Schwab Futures offers One-Triggers-Other orders, which allow you to place your primary order, as well as a protective stop, at the very same time. When the primary order is filled, the stop order will be automatically activated on your behalf. This frees you from having to constantly watch the market, and it relieves you from having to worry about entering your stop order at the right time. We encourage you to take advantage of this powerful feature.

Just remember, though, that stops are not a guarantee against losses – markets can sometimes move quickly through them. But there’s no doubt that picking your bailout point ahead of time, and trading with stop orders, is of vital importance.

Focus on a Limited Number of Markets

Don’t spread yourself thin by trying to follow and trade too many markets. Most traders have their hands full keeping abreast of a few markets. Remember that futures trading is hard work and requires a substantial investment of time and energy. Studying charts, reading market commentary, staying on top of the news – it’s not easy. If you try to follow and trade too many markets, there’s a good chance you won’t give any of them the time and attention they require. For most traders, 6-8 markets is about the maximum they can reasonably track.

Balance

Though you don’t want to try to follow too many markets, the opposite is also true – trading just one market may not be a terrific approach, either. Just as diversification in the stock market has well-known benefits, there might be advantages to diversifying your futures trading, too. For instance, suppose you expected gold prices to decline, but it turns out that you’re wrong. But you also expected the cocoa market to rally, and this proves to be correct. In this case, the gains on your cocoa position make up for (hopefully they more than make up for) your losses in the gold market. If you’d traded only gold futures, you might have been in bad shape. As the old saying goes, don’t put all your eggs in one basket.

Pace

If you’re a new trader, start slowly. There’s no reason to begin trading 5 or 10 contracts at a time when you’re just beginning.

In some cases, exchanges offer mini futures products that are identical to standard futures products – except that they’re smaller. The CME Group, for instance, offers an E-mini S&P 500 futures contract that’s identical to its flagship S&P 500 futures contract, except for the fact that the

Buy or sell

Trading opportunities present themselves in both rising and falling markets. It’s human nature to look for chances to buy, or “go long” the market, but if you’re not also open-minded to “going short” a market, you might be unnecessarily limiting your trading opportunities. Remember that with futures, it’s just as easy to sell (“go short”) the market as it is to buy (“go long”) the market. You can buy first, and then sell a contract to close out your position. Or, you can just as easily sell first, and later buy a contract to offset your position. Whether you buy first and sell later, or sell first and buy later, you’ll have to post the required margin for the market you’re trading – there’s no difference at all. So, don’t overlook opportunities to go short!

Patience

Don’t get so wrapped up in market action that you lose sight of the larger trading picture. As a self-directed, online trader, it’s true that you should conscientiously monitor your working orders, open positions, and money balances. But don’t hang on every uptick and downtick in the market. Not only can you drive yourself crazy, but you can be thrown by little market zigzags and whipsaws that appear formidable and significant at the moment but which, in retrospect, were only small, intraday blips. In other words, try to

Margin

If your account should happen to go on margin call, you’ll have two ways to meet the call.

Going “short” is as easy as going “long”

If you think the price of a commodity market is about to move higher, you can buy (“go long”) a futures contract. However, if you believe a commodity price is going to decline, you can sell (“go short”) a futures contract just as easily, with no special uptick or short-sale rules. It’s just as easy to go short as it is to go long!

Financial futures

Financial futures are based on underlying financial instruments. Financial futures generally fall into three broad categories: Stock indexes (such as S&P 500 futures and Nikkei futures), global currencies (such as the Euro and the Japanese Yen), and interest rates (including U.S. Treasuries and Eurodollars).

Options on futures

You also can trade options on just about every futures contract we offer, with everything from simple outright option trades to complex option spreads. If you’re an equity options trader, you’ll enjoy the fact that your knowledge is largely transferable to futures options. Though the underlying instrument is a futures contract, rather than a stock or index, all the same option fundamentals and strategies still apply.