Beginners Guide to Trading Futures - Part 2 of 3
Wednesday, October 31, 2018
Beginners Guide to Futures Trading – Part 2 of 3
Over the course of this three-part series, we aim to fill a void in information online about how an uninformed individual might approach the temptation to enter the exhilarating world of futures trading. During part 1 of 3, we answered the following common questions:
- What are futures?
- What are the advantages of trading futures over other product types (e.g. stocks)?
- How do I find the best futures broker?
- Should I use a broker?
Part 2 in this series will cover the following:
- What hardware setup do I need to begin trading?
- What software should I choose?
- Should I use a squawk for news or any other news sources?
- How do I place my first trade?
- Trading Journal Template for Beginners
If you have any questions about any of the content, feel free to get in touch with us at email@example.com.
What hardware setup do I need to begin trading?
Some trading setups are incredibly elaborate. On the trading floor of our partner firm, most of the traders have two * twenty inch plus screens for trading and charts with some smaller screens for news feeds, journaling and web access. One of the main forums to discuss futures trading, futures.io, has an annual competition where a prize is given to the trader with the best hardware setup and so it becomes an aesthetics competition as well as a functional competition. And it’s no harm. Walking to the front of a beautiful setup every day can ignite the senses and get the trader engaged. But the question asks, “What setup do I need to begin trading?” and need is a huge differentiator. Technically, using a web-based trading software such as TT or Tradovate or Trading View, all I need is an internet connected phone.
It’s possible now to chart trade, DOM-trade and ticket trade from the phone screen while you are on the move.
Having the ability to trade from your phone is nice to have. Because, from the perspective of a senior trader it can give the extra comfort of knowing that if the market moves they can be alerted even if I am away from my desk. They can watch long-held positions and they can paper trade to stay engaged and focused. But trading is a stressful, energy-intensive, game of focus and mindful vigilance and with price action, technical analysis, sentiment and fundamentals, you simply cannot fit the perspective that is required to trade effectively on one under-sized screen. You also cannot be in the best possible frame of mind to trade if you are mobile. There are simply too many distractions from the figures and the news to allow for optimal concentration and reaction.
So, let’s cut to the chase and state that the best place to trade is at a desk and your desk and chair should be comfortable enough to withstand long period of sitting and watching. On that desk should sit at the very least a laptop with a decent size screen (at least 15.4 inches). Recommended however is at least one more screen. Most laptops these days are fast and capable enough to run this second screen without impeding performance. Now, you have the basics – one trading screen from which the trades will be executed and one screen for charts and news. Most software products support only PCs but those mentioned above are web-based and so can be used on PC, Mac, iOS and Android – basically from wherever an internet browser can be opened. You will need the fastest internet connection possible. You do not need the stress of a lag in performance when the market gets busy. Laptops have built in batteries but you should have the charging cable connected also with the battery used as a backup in case of a power outage. In the case of a desktop PC, you can purchase backup power sources that will provide you with an hour or more to get out of positions and delete orders etc. even if the power to the modem and the pc tower disappears. It may never happen but the peace of mind is worth the investment. Here is a checklist:
- Trading PC, Mac or Laptop with as strong a graphics card as affordable
- Second screen where possible (one for trade execution, the other for charts and news)
- A comfortable keyboard
- A comfortable mouse (For mouse and keyboard, those focused on gamin are usually the best)
- Headphones– They don’t need to be very expensive. Just good enough to listen to news announcements, trade fill sounds etc.
- Microphone/webcam – for skype calls /meetings
- A strong desk with ample room for all equipment
- A chair that allows you to sit for long periods (Some choose to have a yoga ball or similar for very long shifts)
- Backup power source advisable
- Clock – ones that speak can be useful for counting down to a given time
- Calculator – Stationary – Trading Journal
What trading software should I choose?
The answer to this will be relatively short. Choose the platform that you like best after testing them all! All platform vendors offer free 14-day or in some cases 30-day trial period. They will either offer them on their own sites, via brokers or both. As well as getting in an amazing amount of practice and learning many new skills and tricks with technical analysis indicators, charts and order types, you will also come to see very soon what you like and what you need in a software. They all tick certain boxes and miss others. There are so many options simply because they cater more towards a certain trading style and therefore towards a certain target market and associated taste. Some traders trade exclusively via charts, some trade exclusively on ladder/DOM. Some use technical analysis only, some use fundamentals or order book size only.
TraderDock supports Trading Technologies new TT (Web-Based) platform and Rithmic which works with its own RTrader and RTrader Pro platforms as well as a host of other execution platforms such as: Sierra Charts, NinjaTrader, Tiger Trade, Trade Navigator, QScalp, Quick-Screen Trading, Scalptool, Photon Trader, VolFix.Net, MultiCharts, MotiveWave, RInvestor, BookMap XRay, Collective2, Agena Trader and Inside Edge Trader.
Again, measure twice, cut once. Try them all. Decide on your favourite. Worst case scenario – you change to the next best.
Our Recommended Platforms: RTraderPro or TT.
Should I use a squawk for news or any other news sources?
Yes. Trading from a home office can be a psychological battle. You can feel totally isolated and too caught up in your own thoughts. Aside from important news and economic release announcements, the interjections of the squawk during the trading day can remove the loneliness from the daily routine.
There are a few providers to choose from. Again, like the software vendors, each squawk operator has a trial period to try capture your monthly subscription. Make use of this trial to help discern between their services and to get a sense of its value to your trading style. This decision, for a beginner trader will rely heavily on budget available versus the value that it brings. If you do not trade fundamentals, then $250 per month on a multi-asset macro squawk service probably isn’t the nest investment. There are some much cheaper options however. Finanacialjuice.com have a completely free squawk and although it purports to be real-time, in tests we found it to be a few seconds delayed. This is more than enough to get warnings about upcoming economic figures and the larger market shifting announcements. Another very reasonable retail-focused offering is Talkingforex.com which costs circa $35 per month. As the name suggests, the primary focus is forex but the service still announces all the major market impacting news and figures and this is probably as expensive as a beginner trader can handle in most circumstances.
The 3 most professional services are RANSquawk, TradeTheNews and LiveSquawk all of whom will provide you with email updates and scrolling real-time news headlines on their web-portals as well as the audio squawk service. Some also provide instant messaging with analysts via the portal.
Sidenote: In terms of free offerings, TweetDeck is an amazing source of real-time or near-real-time news, reaction and sentiment for traders and it is recommended that this be open one of your trading screens, next to charts for example.
How do I place my first trade?
With TraderDock, you can visit the FAQs section of the website and click on the Getting Started guide for a step by step instruction list on getting connected to the exchange and data feed via your trading platform and placing your first trade. In short, the process will go as follows:
- Broker or TraderDock will have emailed you with credentials for your chosen data feed and trading software provider
- You will install your trading software if necessary or open web-based software in a new tab on your browser
- Here you will enter the credentials provided to log in
Once the trading platform is open you should look to open the following windows:
- Positions: Your net trading position and the associated P&L
- Fills: Your completed trades
- Orders: Your working, modified or cancelled orders
- A DOM: Your trade execution price ladder
- A Chart and your chosen technical indicators.
- Check that the correct account is listed for your trades
- You should set up your order types and order quantity defaults
- Note: Bids/Buy Orders are usually to the left of the DOM with Sell orders/offers to the right. Practice order entry extensively in a simulated environment prior to placing orders in the real-money live markets.
Trading Plan Template for Beginners
Professional traders maintain trading journals! It is part of the job. Maintaining an honest journal will help you develop a trading system faster and more effectively and will be key to the hugely significant psychological side of your trading game.
This is because both the strategic trading edge and the psychological edge will develop together, in tandem, one re-enforcing the other. Noting the refinements of your system based on consistently improving statistical feedback will help build your confidence in your trading in general which will help you trade more and therefore further develop and tweak the system.
We will soon be integrating a trading journal into the core functionality of our TraderDock Dashboard but for now I’ve included a template that can be copie:d to OneNote, EverNote, Google Sheets, Excel or to a page on your table to get you started in the right direction. This can then of course be developed daily to suit your specific needs. I’ve included some sample written notes to act as a guide for filling in the strategic elements of your first trade.
The concluding part of this 3-part Beginners Guide will cover the following:
- Where can I learn more about technical analysis?
- Where can I find more general trading insights?
- What are the best books to begin with for trader psychologym improvement?
- How do I choose my first trading strategy?
- Should I join trading forums/communities?
- + More
The TraderDock Team