The Complete Guide to Futures Trading: What You Need to Know about the Risks and Rewards

CHAPTER 2

Becoming a Futures Trader

Knowing about the markets and deciding to invest in them are big steps for an aspiring trader. But then you are faced with an even greater question—one that will help determine whether you meet your investing goals:

How do I make a trading decision?

This chapter presents an overview of some of the many techniques used today to analyze futures markets so you can make sound trading decisions. Of course, most of these techniques have entire volumes written about them, and a detailed discussion of each topic is beyond the scope of this chapter. Still, with this chapter, you will gain a broad introduction to the meat and potatoes of trading.

You may be surprised to find that this chapter will be useful to both the independent trader and the investor who takes the less-involved route of managed futures or an auto-execute trading system. The independent trader who chooses either the self-directed or the broker-assisted trading approach will certainly wish to know how to make trading decisions. Less obvious, though, is the benefit to the managed or auto-execute investor, who can use the same knowledge to help choose a program from among the universe of programs available for investment.

A basic rule for passive investors is: “Know your manager's investment philosophy.” A recurring theme throughout this book is that, whichever approach to investing you choose, it should be a good match to your personality and comfort level. This chapter will help you ...