How Position Sizing Will Make or Break Your Futures Account:

📍Posted by: Max Power.

The biggest mistake you can make in futures trading is not knowing how to properly size your positions.

Proper position sizing involves taking advantage of the market’s price action, and it is the difference between a successful futures trader and a trader who loses money on each trade.


The first thing you need to do is understand how a futures contract works. Here are some key points

– A futures contract is a standardized trade between two parties that is settled at expiration date.

– A futures contract allows investors to speculate on future prices of commodities or assets without owning those assets themselves

– Futures contracts are bought and sold during specified periods (usually 30 days) during which time they are guaranteed by their respective exchanges to be settled at an agreed upon price depending on how much investors choose to buy or sell at any given point during the contract’s term.


Now that we have defined futures contracts, let us talk about position sizing. To put it simply, proper position sizing means setting the correct number of units to buy or sell an asset. The correct number of units (or exposure) is dictated by your tolerance to risk and ability to manage it.

Risk management can determine whether you live to trade another day or not. It can keep you from risking too much and blowing it all. Sure, there are upsides to taking on increased risk, but these opportunities for increased profit also come with the risks of losing larger amounts.

Without knowing how to size your positions correctly, you may end up opening positions that are far too large, creating an increased vulnerability and resulting in catastrophic losses if the market moves just a smidge against you.

The trouble in determining an appropriate position size is the human nature to trade emotionally. Large positions make you feel good when you win, but also make you feel worse when you lose. This is a dangerous pitfall that has tripped up even the best futures traders. To overcome this, positions must be sized wherein a win or a loss do not evoke a strong emotional response one way or another.

The best ability to trade unemotionally will always be through algorithmic trading. A robot running on an algorithm will never consider individual emotions and will perform exactly the same every time. This removes the emotional trading pitfall and opens possibilities unavailable to human traders.

Ultimately, the difference between successful and unsuccessful traders is risk management. And the first step towards smart risk management is proper position sizing.


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Mr Peanutbutter
Mr Peanutbutter
1 year ago

I never thought of it this way – algorithmic trading seems the way to go. Apart from Lighthouse, what are the other best ones out there?

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