Commodity Futures and Options Trading - How Efficient Is YOUR Trading? - PART 3

When you think about it, many events need to be just right to make an efficient and profitable trade. Many new commodity traders think they will make up for sloppy trading on the "next big trade". But good trading is an "every time" thing. If you're looking to fine tune and squeeze every penny of expenses out of your trading, then read on. To ignore trading expenses is to be doomed to break-even results at best.





It's frustrating when we perfectly forecast a move but barely make a profit due to a string of problems and errors. Lets say the E-mini futures contract hits a brick wall at 1300 and you expect it to decline to 1296. This is a potential short sale of four points, and let's say it does just that. We enter and exit "at the market" making our spread cost one half point. We pay a round turn commission costing one-eighth to one-quarter point. We give up a half point of market slippage by the time we push the mouse button.



The move looks so good we overstay our welcome by a few minutes as it rallies back a full point. We panic out giving up this full point. For even a good trader, this is sometimes a normal train of events . We gave up 2 1/4 points of a four-point move, thus, we pulled out roughly 45% of the total move.



But what would have happened if the move went only two points instead of four? Or what if we procrastinated longer on entry? And what if the move went against us right from the start, stopped us out and then made the expected four point move? There are so many detours to the perfect trade. A big move that we accurately predict is rare. It's important to catch them and pull the maximum out when they occur. That's because they make up for the times when the move doesn't materialize or we mess up the trade ourselves.



The bottom line is not to beat yourself up when you do not get perfection from each future contract or options trade. No one does. Remember that - no one trades perfectly! The objective is to just be better than most. You don't have to be the best to make money; just better than most.



Your job is to watch yourself trade and identify the money drains. Pretend you are an efficiency expert watching a factory production line. You need to identify and then work out the reasons why you are not getting at least 50% of the best moves. If you can eventually do this better than MOST commodity futures traders, you've succeeded and the market will pay you accordingly!



Good Trading!



There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.