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Tuesday, January 10, 2006

What Is Your New Year's Resolution?

What are your resolutions for the coming year? Exercise more, and lose some weight? Get your household budget under control? Go to church more regularly? While many of these types of resolutions fall by the wayside after just a few months, we’d like to share some long-term futures trading resolutions for 2006, based on our experience serving futures and options traders in more than 100 countries worldwide. These aren’t one-time pledges, but solid trading practices for you to follow throughout the year. And if you stick with them, we think there's a very good chance you'll become an even better trader.

Approach the futures markets realistically. Beginning futures traders who expect to quit their "day job" and make a good living trading futures in their first few years of trading are usually disappointed. You don't become a successful doctor, lawyer, or business owner in the first couple years of the practice. It takes hard work, dedication, and perseverance to achieve success in any field of endeavor -- and trading futures is no different. Futures trading is not the easy, "get-rich-quick" scheme that a few unsavory characters make it out to be.

Limit the number of markets you follow and trade. Don’t spread yourself too thin by trying to follow several markets. Most traders have their hands full keeping abreast of just a few markets. At XPRESSTRADE, we offer access to 25 leading futures exchanges around the world, and you can trade more than 300 different commodity and financial futures products. But that certainly doesn't mean you ought to try to trade everything! Pick a handful of markets that are of greatest interest to you, and focus on them intently. It's far better to concentrate on a handful of markets than to try to trade everything.

Establish a trading plan in advance. You’ve heard this a million times: Plan your trades and trade your plan. But, there’s a good reason this phrase has become so common. Developing a trading plan helps you remove emotion from your decision-making process. And, the emotions of fear and greed are always in the wings once you have money on the line. Having your own personal plan allows you to determine if subsequent setbacks are either a failure to remain disciplined, or problems with the plan itself that indicate an adjustment to the plan is due. Accordingly, any successes can be similarly assigned to either adherence to your plan or dumb luck. Traders with no pre-determined trading plan are flying by the seat of their pants, and that's usually a recipe for a "crash and burn."

Trade markets you can afford, and don't over-leverage. Some markets are riskier than others, so always check the volatility and daily ranges of any market to be sure that it fits your trading criteria. And don’t make the beginner’s mistake of devoting all the money in your account to margin requirements for open positions. Because futures trading margin requirements are low, there's a good chance you have enough money to trade multiple contracts. But just because you can afford to trade 20 contracts, for instance, doesn't necessarily mean you should -- perhaps you ought to try 5 or 10 contracts to see how things go, and if you're successful, gradually increase your trading size. Remember that drawdowns are inevitable, so you should avoid placing yourself in such a position that just a couple of bad trades can wipe you out -- or negate your ability to recover.

Know when to exit a trade. Know the objectives for your trade going into it. But, always have a bailout plan and place a protective stop order whenever possible, given exchanges’ order acceptance policies and market liquidity. Ask yourself, "At what point do I absolutely not want this position any more?" Call that your doomsday stop and get it working. If such a stop does get hit, then something is probably very wrong with your trade. Remember, stops do not guarantee against losses -- markets can sometimes move quickly through them. Also, remember that stop orders can remain unfilled, as in limit moves. Picking a place to bail out of a trade is a powerful first step toward taking control of your trading.

Always trade with protective stops. Using protective buy stops or sell stops upon entering a trade provide a trader with a good idea of about how much money he or she is risking on that particular trade, should it turn out to be a loser. Protective stops are a good money-management tool, but are not perfect. There are no perfect money-management tools in the world of futures trading. But you should know that most successful traders will not sit on a losing position very long at all. They'll set a tight protective stop, and if it's hit, they'll take their losses (usually minimal) and then move on to the next potential trading opportunity. Traders who sit on a losing trade, "hoping" that the market will soon turn around in their favor, are usually doomed. If you need any assistance learning to use stops -- or if you'd like to know more about XPRESSTRADE's Trailing Stops functionality -- please don't hesitate to contact us.

Don't trade against the trend or try to pick tops and bottoms. It's human nature to want to buy low and sell high (or sell high and buy low for short-side traders). Unfortunately, that's not at all a proven means of making profits in futures trading. Top pickers and bottom-pickers usually are trading against the trend, which is a major mistake. You're far better off looking to identify beginning market trends, confirming the trend, and then trading with the trend. Sometimes trying to pick a top in a powerful bull market is like stepping in front of a speeding locomotive. And trying to pick a bottom in a falling market can be like trying to catch a falling knife. Trade with the trend, not against the trend. "The trend is your friend."

Accept responsibility for your own actions. When you have a losing trade or are in a losing streak, don't blame your broker or someone else. As a self-directed trader, you have total control over your account. You're calling the shots and placing your own orders. You're the one who is responsible for your own success or failure in trading. You deserve all the credit when trades are successful, but you also have to take responsibility for trading outcomes that aren't profitable. If you feel you are not in firm control of your own trading, then why do you feel that way? You should make immediate changes that put you in firm control of your own trading destiny.

Ask for help as you need it. Futures trading is not easy, and being successful requires dedication and educating yourself as much as possible. There are all kinds of really useful resources available on the public side of the XPRESSTRADE website ( www.xpresstrade.com ), including exchange brochures, a self-study courses, a variety of starter kits, and even an online bookstore for traders. But, don't feel that you need to tackle the futures markets alone, and don't be afraid to ask for help. One of the things that sets XPRESSTRADE apart from other brokerage companies is our exceptional customer support. We're here 24 hours per day during the trading week, and we strive to be quick, knowledgeable, and friendly. If we can be of assistance to you, please don't hesitate to contact us, whenever the need arises. You can reach us by toll-free phone, e-mail, or even live chat.

Take the Futures Power Course. Whether you're a newcomer to the futures markets or an experienced trader, the Futures Power Course can help you become a more confident, and potentially more successful, trader. This is a complete online futures trading course, and it offers an honest, no-nonsense, no-hype approach to the futures markets. You'll learn to use technical analysis tools. You'll learn how to spot potential trading opportunities. You'll learn how to set entry and exit points. And most importantly, you'll learn the art of risk management and how to avoid common trading mistakes. The course is totally online, so you can take daily lessons at your convenience. But it's backed by support from Jim Wyckoff and the entire XPRESSTRADE customer service team. Learn more about the Futures Power Course today.