12 Principles for Successful Futures Trading E-Book

Niclas Hummel

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 178

Veröffentlichungsjahr: 2023

Beschreibung

Do you want to navigate the financial markets successfully and profit from futures trading - one of the most profitable wealth-building opportunities? Have you brought enough courage, perseverance, and thirst for knowledge with you? - Then this book is exactly right for you! In this book, Futures Trader Niclas Hummel summarizes all the principles for successful trading with futures contracts that he has discovered over his 11 years of experience. It explains how you too can successfully manage risks. The author adopts a step-by-step approach towards all important topics such as broker and market selection, entry signals, and trade management examples. Other important considerations include: statistics, expectations, and managing mental resources. "I want trading to serve you and offer a greater risk-reward for your time. Because trading doesn't always mean being active, rather letting the market work for you." This book is suitable for aspiring and interested derivative traders, and I cover the following products: - CME, NYMEX, CBOT, EUREX Futures - Mini-Futures, Micro-Futures and Options - Crypto markets: Crypto Perpetual Futures, Decentralized Crypto Derivatives A good trader has an overview of different asset classes: - Stock indices / Stocks - Commodities - Currencies / Forex / Crypto - Bonds How you can profit from the overall market and master the skill of high quality selection of markets and trends has been best described with the principles in this book. Most traders start out with a negative expectancy value. It is inherent in human nature, that betting on prices with risk and rewards doesn't come natural to us. Each individual principle increases the trader's expectancy value because a new mindset towards opportunities and risks, as well as practical techniques, is taught - until your expectancy value as a trader gets positive and the compounding effect, which is unique to short term futures trading, can take effect. In futures trading, psychology, technique, product selection, brokers, taxes, and precise methodology are important. All of these topics are explained in detail in this concise book format, so that the reader ultimately gains a comprehensive view of the financial markets and can make clear decisions in the world of trading. The methodology is further illustrated with example charts and other related graphs.

Leseprobe

RISK DISCLAIMER

Trading financial instruments such as futures, stocks, options, certificates, currencies, cryptocurrencies, and other investments involves substantial risks and may not be suitable for everyone. The trading strategies and techniques described in this book may not be suitable for every individual or situation. Past results do not guarantee future profits.

It is important to emphasize that trading in financial markets can potentially lead to losses, and you should only trade with capital you are willing to lose. You should be aware of all risks and seek independent financial advice before implementing the strategies described in the book.

The author and the publisher of this book do not assume any responsibility for any financial losses or other damages that may arise from trading or applying the information presented in the book. Each reader is responsible for their own trading decisions and should carefully consider their financial situation, risk tolerance, and investment objectives.

The content of this book is solely for educational purposes and does not constitute investment advice. It is your own responsibility to seek professional advice and carefully assess the risks before making trading decisions.

Please be aware that financial markets can be volatile, and market conditions can change rapidly. Always trade responsibly and with caution.

Before you commence trading, you should familiarize yourself with the applicable laws and regulations in your country and ensure that you possess all necessary licenses and permits.

“It took me five years to play the game intelligently enough to make big money when I was right.”

Jesse Livermore (1877-1940), Stock Trader and Speculator

TABLE OF CONTENTS

Risk Disclaimer

Foreword

INTRODUCTION

The Benchmark

Risk Alpha

Leverage

Compound Interest Effect

Expectancy

Loss Aversion

PRINCIPLE I

Reflexivity

Selection on Different Levels

Markets

Crypto

Holding Positions Overnight

Derivative Trading Products

Laws and Taxes

Product Selection Dependant on Capital

PRINCIPLE II

Risk Simulation

Return and Drawdown Statistics

Scalping

Costs

Stop-Loss Distance

PRINCIPLE III

The Overall Market

Market Participants

Obvious Correlations

Extreme Events

Serial Correlation

Risk Addition

Pyramiding

Positions in Different Markets

PRINCIPLE IV

Fundamental Analysis

Prediction Correlation Analysis

Interval Analysis

Base Statistics

Supply and Demand

Price Levels and Trends from Higher-Timeframes

PRINCIPLE V

Point Counting

Candle Trend

Double Top/Bottom

Non-Time Based Charts

The Supertrend-Method

The 200 EMA

Sideways Market

Entry Signals from Correction

2 Attempts

Combination of the Methods

Situational Analysis

Take Pain

PRINCIPLE VI

Trailing

Timed Management

Exit Conditions

Profit Poker

Targets

Early Exit in Profit

Winning the Day Exit

Backtesting Trade Management Rules

PRINCIPLE VII

News Announcements

Decision before a News Announcement

Financial Market Holidays

Session Volume

Volume

Volume Zones

PRINCIPLE VIII

Variable Risk

Risk Halving

PRINCIPLE IX

Schrödinger’s Cat

PRINCIPLE X

Risk per Trade

Available Capital

Collateral

Values & Goals

Account Building and Capital

Management of External Capital

PRINCIPLE XI

Anchoring Effect & Confirmation Bias

Every Decision Matters

Trading Stress & Mental Capital

Risk Tolerance

The Trading Demons

The Search for the Holy Grail

Dealing with Losses

Dealing with Profits

Identification

Greed and Fear as Communication Partners

Narrow Outcomes

Priming in Trading

PRINCIPLE XII

Sit-on-Hand

FOMO

Full Automation

Meditation

Trading Plan

Trade Management Examples

Afterword

Keyword Table of the Principles

Contact

Sources & Links

My deepest gratitude goes to my father Alois Hummel, who always stands by my side unconditionally.

FOREWORD

During my economics studies at the age of 20, I began trading in the currency market to bridge the gap during the boring lectures. Trading in the financial market immediately seemed closer to reality to me than any theory about price elasticity or the like. I was always someone who had to jump right in, naturally with real money. I delivered furniture to refill my first trading accounts after often losing them within just three months.

No setback could stop me, and I kept starting over, constantly fascinated by the possibilities of the financial market. When things weren’t going well, I would set the risk to the maximum and hope for a trade that would make up for all the losses. Of course, this was not a recipe for success, but rather emotional gambling.

I eventually recognized this fact and tried to address the problem of constantly giving back profits by acquiring more knowledge. I read countless books on the subject of futures trading, chart patterns, trading psychology, and the like. While this methodical studying improved my knowledge of the financial market and introduced me to the perspectives of dozens of trading methods, it didn’t make me particularly profitable yet—for quite some time.

There were indeed some positive interim results when I followed a method with discipline, but even after 5 years, the annual outcome was not characterized by the consistent profits I had hoped for. Futures trading became a frustrating pastime because I simply couldn’t overcome the gap between knowledge and results.

At one point, I was completely fed up and, somewhat disheartened, turned my back on the financial market to focus on my career as a software developer. For an entire year, I had nothing to do with charts and the like. It was a relief for my strained nerves. However, after some distance, my interest in the financial market was reawakened, so I took a small portion from a larger crypto investment and planned a return to trading. However, I couldn’t continue as I had before.

What would I do better this time? I thought about it for weeks, and during a vacation on the island of Corfu, in the presence of sea air and olive trees, the idea finally came to me: What had I mostly done wrong in my first 5 years? I had jumped from one trading method to the next, expecting to make profits by mechanically following certain rules. Yet the financial market is like the Wild West, where everyone tries to outsmart each other with their best tricks. Everything is allowed, and everything changes, day by day and year by year. Rules weren’t the solution, so I established 12 principles that summarize the sum of my most important insights—principles that I can always rely on.

I decided then to commit to trading in accordance with the 12 principles. And that made all the difference.

I started again with a small account. €1,000 quickly grew to €3,000, and then continued to increase to five-figure amounts. The year developed positively, and the following years did as well. My dream of building an account that I could live off of was finally realized after 4 years of trading.

What are principles, actually? Principles are more about philosophical truths than about clear rules. Even George Soros studied Karl Popper’s philosophy extensively before becoming a hedge fund legend. Popper taught him that our knowledge is never absolutely certain and should always be questioned. This mindset helped Soros better understand the uncertainties and often irrational nature of the markets, allowing him to act accordingly.

With much experience and refinement, the 12 principles have become clearly defined within me, and I am very grateful to have finally brought inner peace to my trading routine. A trader guided by principles has a strong motivation to reconcile the truths of the external and internal worlds and to understand and leverage the forces of modern capitalist financial markets.

In this revised edition of the 12 principles, many improvements have been made. In particular, the structure and the section on emotion management have been significantly optimized.

I promise you that with the practical principles and analysis methods presented here, you can achieve successful futures trading if you take full responsibility for your actions.

PRINCIPLE I

»Selection is Key«

In the financial markets, it’s crucial to recognize that there is a vast array of markets, point of views and trading products available. However, beginners often have a different perspective: they believe that choosing the right strategy is the most important aspect. Why is this a misguided focus?

The coincidence that a strategy performed exceptionally well in the past can mislead many investors. The focus on “historical patterns” and the search for the Holy Grail of trading systems has cost me much futile effort and has been a misleading main focus. Patterns from the past often do not hold true tomorrow, or they take a very long time to manifest on the exact day you analyzed.

In the age of algorithms, so-called ghost patterns are revealed by machine learning algorithms, and as soon as a competitor discovers them, they are nullified. It is a game of elusive appearances. Describing this phenomenon as “reflexive,” as George Soros applies the reflexivity theory5 of Karl Popper on financial markets, is very enlightening.

REFLEXIVITY

The theory of reflexivity says that investors not only make decisions based on objective reality but that their subjective perception of reality plays a significant role. This perception leads to actions that can, in turn, influence reality, creating a feedback loop.

This can be illustrated with an example of a company: