Understanding Risk
Trading futures can offer substantial rewards — but it also comes with significant risk. Before you place your first live trade, it’s crucial to understand what’s on the line and how to protect yourself.
High Risk, High Reward
Futures contracts are leveraged instruments. This means you're controlling a large notional value with a relatively small amount of capital (margin). While this increases your profit potential, it also amplifies losses.Example:
With $500 in margin, you might control a contract worth $50,000. A 1% move against your position is a $500 loss — a 100% wipeout of your margin.
Key Risks:
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Leverage Risk – Small market moves can lead to outsized gains or losses.
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Volatility Risk – Futures markets can move rapidly, especially during news events or low liquidity.
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Margin Calls – If your account drops below the required margin, your broker may liquidate your position automatically.
- Emotional Risk – Stress, revenge trading, FOMO — these psychological factors destroy accounts more than bad setups.
Position Sizing
Never risk more than a small percentage of your account on a single trade — typically 1–2%. This helps you survive a losing streak.Use Stop Losses
Always set a predefined exit point. Never trade without a stop.Know Your Max Drawdown
Set a limit for how much you’re willing to lose in a day, week, or month. Respect it. Walk away when it's hit.Keep a Trading Journal
Document your trades. Know what’s working and what isn’t. Avoid repeating mistakes.“The goal of trading is not to make money, but to keep your money”