One of the first lessons a new trader learns is in order to be successful as a trader, a system must be utilized which fits their personality and risk tolerance. Traders and investors across all financial markets understand their success depends on a system and methodology that is designed to fit their unique criteria and trading goals. Although there are many trading systems, this article will describe three possible approaches traders could use to learn how to trade futures using emini contracts.
One of the more popular methods used by traders is the trend following method. Executing trades that follow the prevailing trend is favorable since going with the current trend places the trader in higher percentage trades since sentiment favors the current trend. Trades are initiated only when certain criteria are met such a price move in the direction of the current trend with expectations that the current trend will continue.
Another system not as widely used as the trend following system is the countertrend system. This system is best utilized by veteran traders with experience in market dynamics since it requires that trades be initiated in the opposite direction opposed to the current trend. Contrarian traders that have a tendency to oppose the crowd mentality utilize this method when they receive signals the market may be correction or is due of for a pullback. This system can be applied when indicators reveal the market may be severely over-bought and pulling back before continuing the current trend. Traders that favor only scalping a few points in profit will often use this method.
Some traders use charting patterns to determine when to enter and exit the market. Chart pattern recognition is widely used among market participants, especially with Japanese candlestick charts. Chart pattern traders, especially in day trading, seldom consider the current trend and rely on candlestick formations to determine weather to enter or exit the market. By learning to recognize these formations and what the mean in terms of market direction, the trader can very often predict which direction the market will move.