Futures Trading Tips

Below are the 24 Trading Tips based on the methods of W.D. Gann. By following these money management rules, your trading account should remain in tact even after a string of losing trades.

1. Gann recommended dividing one's trading capital into 10 equal parts and never using more than 1 part to trade any commodity. In effect, this risks 10% of trading capital on any position. However, many other top traders such as those featured in the Market Wizards books recommend using only 1 or 2% per trade.

2. Spread your risk over a range of different markets, for example, stock index, currency, and several commodities like grain, livestock, energy, metals, industrials, softs.

3. Always use Stop Loss Orders to protect capital whenever you make a trade, and move them to protect profits.

4. Never over-trade. Trading up to 5 or 6 markets at a time has been recommended by some traders such as WD Gann and Larry Williams.

5. Never let a profit run into a loss. As soon as a trade becomes profitable, move your stop loss to lock in profits.

6. Always trade with the trend, never against it.

7. "When in doubt, get out." If you are unsure of the market position it is safest to exit with a guaranteed profit or small loss. If you can, try and buy on dips or down-days and sell on peaks or up-days.

8. Avoid congesting markets and only trade in markets that are trending.

9. Trade in a variety of different markets to spread risk.

10. Never close a trade without good reason and follow up with a stop loss order to protect profits.

11. Create a surplus account. When you have made some profits place them aside to use only in an emergency.

12. Never average a loss. Practise on paper until you make regular profits… Do this in real-time NOT on historic data because it is too easy to optimise a trading system to fit past results.

13. Never enter a market just because you have become bored of waiting, or exit a trade because you have lost patience.

14. Avoid taking small profits and big losses.

15. Never cancel a stop-loss order once you have placed it.

16. Avoid entering and exiting the market too often. Although there are reports of Gann making hundreds of trades in a small period of time, these were typically for exhibition purposes. In reality, Gann would only make a handful of commodity trades a year.

17. Be as prepared to sell short as to buy long and always follow the trend.

18. Never buy just because the price of a commodity is low or sell because it is high. For example, just because Crude Oil fell from $40 to $20 would not be a good buy trade if Crude then fell to $10! (Which it did a few years ago.)

19. Avoid hedging, e.g. buying wheat and covering the position by selling corn; Or buying one Wheat contract month and selling a different Wheat contract month.

20. Be careful with pyramidding and plunging (adding to positions). For example, if you have bought Oats and the market keeps falling avoid buying more contracts on the premise that the market ''has to turn soon'' (plunging). Instead, try and exit for a small loss as soon as the trade has made a small loss.

Similarly, be careful "putting all your eggs in one basket" adding to positions if your analysis has proved correct (pyramidding). Only consider pyramidding if Rule 1 allows you sufficient funds to do so.

21. Never change your position in the market without good reason.

22. Avoid increasing your trading after a long period of success or failure. It is easy to think of yourself as "invincible" after winning a succession of trades. This is the reason most gamblers lose money.

23. Never guess when the market is at top or bottom. Always wait for a definite signal first. 

24. Never increase trading to win back profits.