When I first started trading futures, I was full of excitement, ready to make money and gain financial freedom. I dove in with all the enthusiasm of a new trader but looking back, there are so many things I wish I knew before trading futures. Futures trading can be incredibly rewarding, but it’s also packed with challenges and lessons you only learn the hard way.
And trust me… THE HARD WAY.
In this guide, I want to share some of the most important insights I’ve gained over the years. These are things to know before trading futures that I wish someone had told me when I started, and I hope they help you navigate your journey with more confidence and fewer missteps.
Let’s dive in!
The Importance of a Strong Foundation
The Value of Learning the Basics
When you’re new to trading futures, the basics can seem boring, but trust me—they’re essential. Futures trading isn’t like trading stocks. There are nuances like margin, leverage, and contract expirations that make it unique, and if you don’t understand these, you can find yourself in trouble fast. One of the key things to know before trading futures is that mastering these basics will give you a stronger foundation. It’s important to build your kingdom on a strong foundation otherwise you may build it but how long will it last before it comes crumbling down?
I remember when I first started, I didn’t fully grasp the impact of leverage. I was so focused on the potential for big profits that I overlooked the fact that leverage amplifies your losses just as much as your gains. That is why present day I trade the Micros instead of the normal ES. Take the time to learn about these fundamentals. Use demo accounts, read, and watch videos—whatever helps you solidify your understanding. It’s tempting to skip over this, but a strong foundation in futures basics is what separates consistent traders from those who end up burning out. It is 110% worth it!
Why You Need a Trading Plan
Creating a trading plan is something I initially ignored, thinking I’d just adapt as I went. Big mistake. A solid trading plan is your roadmap. It outlines when to enter and exit trades, how much risk you’re willing to take, and what your overall goals are. Without a plan, it’s easy to make impulsive decisions that hurt your account.
Your plan doesn’t have to be complex, but it should cover essential elements like entry/exit criteria, risk management, and maximum daily loss. This keeps you disciplined, especially when things get emotional. For example, if your plan sets a 2% risk limit per trade, you won’t be tempted to throw more money at a trade in hopes of a reversal. But easier said than done right? Even I still break my rules on some days and pay the price for it.
The Reality of Risk and Losses
Understanding Leverage and Its Risks
Leverage is one of the most exciting things to know before trading futures, but it’s also one of the most dangerous. With leverage, you can control a large contract with a small amount of capital, which means your potential gains—and losses—are magnified. It wasn’t long into my trading journey before I learned this the hard way and started to focus on risk management and not get caught up in max leveraged trades.
I was trading on high leverage, chasing what I thought were “sure wins.” When the market turned against me, those losses piled up fast. I can’t even remember how many accounts I had that went from in profit to blowing up. I will guestimate at least 30 accounts I was going for $25k. One big lesson here: always use leverage wisely. Just because you can control $50,000 with $1,000 doesn’t mean you should. Start with low leverage, get comfortable, and increase only when you’ve proven your strategy consistently works.
Losses Are Part of the Process
One of the hardest things to know before trading futures is accepting that losses are a part of the process. There’s a big difference between trading in theory and trading in reality. Losses hurt, but they’re inevitable—even the best traders lose sometimes. So do your best to stay focused on the plan and not get derailed into losing big.
When I first started, I would get incredibly frustrated by losses, thinking they were a sign I wasn’t cut out for this. I let these losses start to control my thinking and I would stack, loss after loss after loss and watch my funded accounts disappear. It really sucked and put me in a dark place mentally and it was not good for trading, and certainly not good for life. Anyways here is the truth: losses are essential learning experiences. If you can analyze why a trade didn’t work and learn from it, every loss is an investment in your future. Keep a journal of your trades, note why you entered, what happened, and what you learned. Over time, you’ll see patterns that help you improve. Something that helped me stay more consistent is screen recording my charts and reliving all of my trades each and everyday. Check out our resources that can help you with this process: HERE
The Role of Discipline and Emotional Control
The Importance of Discipline
Discipline is one of the most underrated things to know before trading futures. You can have the best strategy in the world, but if you don’t have the discipline to stick to it, it won’t matter. Trading has a way of testing your willpower like nothing else. You’ll be tempted to ignore your rules, especially when emotions are running high. Here is another truth, there are many, and I mean many profitable strategies. But none of them will be profitable for you if you do not follow the systems. Why? because by not following the systems, you would have altered that edge in the market and possibly turning it into a losing system.
There were times when I’d hit a losing streak and think, “I’ll just take one more trade to make it back.” But that’s a trap because what if you lose again? Will you start to rage and want to revenge those loses even more? Well it did to me many times and I ended up even more in the red… Discipline means sticking to your plan no matter what. If you’ve set a daily loss limit, honor it. Walk away when you hit it, even if it’s hard. Consistent discipline is what leads to long-term success. And this will probably be the last thing you fully get down as a trader.
Emotional Control in Fast Markets
Futures trading can be intense, especially in day and scalp trading. When the market moves fast, emotions like greed and fear can creep in, clouding your judgment. This is where emotional control becomes vital. The reality is, that you’re going to feel a range of emotions, from exhilaration to frustration, and they can easily affect your decision-making.
One thing that helped me was to take short breaks throughout the day, especially after a big win or loss. Step away, reset, and get back into a calm state before trading again. You’ll make better decisions when you’re grounded. My plan consists of me trading 9:45-11 am EST in the New York morning session. Then I come back at 1:30-3 pm EST. If you find yourself reacting impulsively to wins or losses, take a breath, refocus, and remember that staying calm and rational is key to effective trading. The markets want to confuse and break you so you can lose money. Don’t let it win!
The Power of Contextual Awareness
Why Context Matters
Understanding market context is another key thing to know before trading futures. Many traders rely solely on indicators for entries and exits, but indicators are only as good as the context they’re used in. Market context means understanding the bigger picture, like whether you’re in a trending or ranging market, where support and resistance levels lie, and what’s happening on higher time frames.
For example, if I’m scalp trading on a 5-minute chart, I still check the 15-minutes or daily chart to see the larger trend. It’s really easy to get caught up in the small moves, but ignoring the broader context can lead to poor trades. When you align your trades with the overall market direction, your probability of success improves dramatically and in this game, every % that you can get on your side, the more chances of being profitible.
Monitoring News and Economic Events
Futures markets are highly sensitive to economic news and announcements. Early in my trading, I ignored the news calendar, I mean really I never knew about it for the first couple of months of trading and it cost me a lot. One time, I entered a trade just before a major Federal Reserve announcement without realizing it. The market spiked in the opposite direction, and I had to manually close the trade at a huge loss as I couldn’t even get my stop loss into place because it moved way too fast.
Keeping an eye on economic events is essential for futures traders. If you want to use a calendar, you can use the built-in one on TradingView for free. What you will be looking at in an economic calendar is to track major announcements like employment data, interest rate decisions, and inflation reports, or even if Fed members are speaking. Knowing when these events are coming helps you either avoid trades or position yourself accordingly, avoiding unnecessary risk from surprise volatility. For me it is best to trade before and manage risk going into the event or simply just wait for a minute or 2 after the event has that initial movement.
The Need for Ongoing Learning and Adaptation
Markets Evolve, So Should You
One thing that caught me by surprise is how often the markets change. A strategy that works perfectly in a trending market might fall flat in a choppy one. Successful traders don’t rely on one strategy forever; they adapt to market conditions.
Over time, I learned to evaluate my strategy’s performance under different conditions. I’d ask myself, “Is this working in the current market?” and if the answer was no, I’d make adjustments. Don’t get too attached to one approach. Be open to learning new methods and refining old ones. The most successful traders are lifelong students of the market. The more data you have the more confidence you will gain in your working strategies.
The Value of Mentorship and Community
Trading can feel isolating, especially when you’re going it alone. Early on, I thought I had to figure everything out myself. But joining a trading community and finding mentors has been invaluable. Talking to other traders and hearing their perspectives brought insights I would have missed on my own.
A mentor doesn’t have to be formal; it can be someone with more experience who’s willing to share what they know. They can help you avoid mistakes, refine your strategy, and give you honest feedback. Don’t underestimate the power of learning from others. It can make a huge difference in your journey and that was my goal with the Forexation so if you haven’t already, drop a comment below or join us on YouTube.
Conclusion: The Lessons I’ve Learned
Futures trading has been one of the most challenging and rewarding journeys of my life. If you’re just starting, I hope these lessons save you some of the time, money, and frustration I went through.
To recap:
- Build a strong foundation by learning the basics and creating a trading plan.
- Respect risk and embrace losses as part of the process.
- Develop discipline and control your emotions in the heat of trading.
- Pay attention to market context and economic events to avoid surprises.
- Commit to ongoing learning and adapt to changing markets.
Starting your trading journey is exciting, but it’s a marathon, not a sprint. Take it one step at a time, stay curious, and remember that every trade is an opportunity to learn. With the right approach, you can navigate the ups and downs and become a consistently successful futures trader. Happy trading!
