How To Trade Futures

Get free trading training here - http://www.chrisdunn.com/how-to-day-trade/

In today's lesson is all about trading strategies. In particular, you're going to learn which strategies are relevant in today's market conditions, and the main components of a trading strategy.

Fundamental Analysis vs. Technical Analysis:

Here are some common things people use to make trading decisions based on fundamental analysis:

News
Company earnings
Rumors
Sectors
Economic factors
Technical analysis is all about how you interpret and measure price action to help find trading opportunities. Traders use a mix of these forms of technical analysis:

Indicators
Oscillators
Algorythms
Trade signals
Charts show the price movement over time for a stock, futures contract, option, or FOREX market.

The Inverse Relationship Between Fundamental & Technical Analysis:

Some traders use a combination of fundamental and technical analysis to make trading decisions, where others will be purely technical or solely fundamental.

I think fundamental analysis is very difficult to trade, because news and other fundamental news is usually already "priced into the chart". One way to profit from fundamental information is by knowing something about the stock or market that the mass majority of other traders don't.

However, technical analysis is really easy to see in hindsight, and most traders end up chasing the market.

Here are some key points to remember about technical analysis:

Hindsight is always 20/20
Don't cherry-pick!
Find an "edge"
Most trading theory is useless
What is a trading strategy?

There are a lot of misconceptions about what a "trading strategy" actually is. Some people thing they have a strategy, but all they have is a subjective way to "read the markets", which will get you nowhere.

Trading Strategies are defined as - A set of rules for what trades you take, and how you manage those trades. That's it. In trading you only have two decisions to make: what trades to enter, and how to manage them.

So many people get mesmerized by "fancy charts" or indicators. In the end, it's easy to justify why you could have done something. If you have too much going on with your chart, you won't be able to make clear trading decisions.

There are 4 major components of a trading strategy:

Market
Time frame
Setup and entry rules
Management rules
There are 3 different categories of strategies:

Subjective trading
Rules-based
Automated

At the end of the day, the most important point is to make sure you can effectively test your strategy to make sure you would expect to make money trading it in the future. You'd be amazed how many new traders (and gurus) have no clue if their strategy holds any merit.

I highly recommend reading "Fooled By Randomness", that talks about how humans are pattern seeking individuals who often see patterns in things that are just random events.

Here's an example of my e-mini trading strategy called the MAP Trading Strategy. It gives us clear rules for finding, entering, and managing trades.

In the next lesson we're going to talk about:

Day trading training - fluff vs. valuable, practical education
Learning without risking money, and the "catch 22" of simulated trading
I'm also going to answer some questions from the previous lessons

Get free trading training here - http://www.chrisdunn.com/how-to-day-trade/