Tuesday, 26 October 2010

Lesson - Calculated Risk

How to establish a calculated risk in futures trading?

When you start trading in futures market, your broker will always ask you to place a 'stop loss' order. However, it is very common your stop loss order will be based on your margin available in your account especially when you trade with little margin. This is to protect you from over loss when market is against you.

In general, majority of smart cpo futures traders will know how to set their calculated risk so as to minimise the losses. Here, if you are a novice trader, you must establish a strategy on such a calculated risk method in consistent with your trading. Technical trading all have their own strategy of calculated risk precisely stated unlike fundamental trading.

Therefore, it is good to learn how to trade with technical indicators for a start. Buy some technical analysis books to learn how a technical book helps you maximise profits and limit your losses. The books should be able to teach you all the basics of technical trading. For example, when is the indicator sell mean you are either profit take turn sell or cut loss turn sell. Remember to calculate the profit and loss over a period of time to prove that the indicator is capable to help you accumulate wealth.