THE CORRECT MINDSET FOR FUTURES TRADING -

Futures Trading, which is a highly volatile activity, requires traders to have knowledge, understanding, and the right mindset before entering the field. Here are four key points to understand:

Futures Trading is about profiting from price differences, not investing 💰

In futures trading, which are derivatives linked to various assets like digital currencies, you don’t own the underlying assets like in spot trading. The main objective is to buy and sell contracts to profit from price differences (capital gains) rather than holding the assets themselves.

Futures Trading is not gambling; it requires technical analysis 🎰

While futures trading can involve both upward and downward price movements, it is not a matter of simply betting on whether the price will go up or down, like gambling. Instead, the decision to go long or short in futures trading should be based on technical analysis, which involves analyzing trends and making predictions. If you perceive futures trading as a random guessing game, you may not be successful in your trading endeavours.

Futures Trading is similar to a zero-sum game 0️⃣

Traditional investing in the spot market is considered a positive-sum game, meaning that when the asset prices rise, all the investors benefit. However, futures trading is similar to a zero-sum game, where one party’s profit comes at the expense of another party’s loss. Nevertheless, it doesn’t mean that every time you make a profit, there must be someone else incurring a loss. The other party may be engaging in risk management strategies or hedging.

There is a chance of losing your entire investment 💸

Before you start futures trading, it is crucial to allocate a margin amount in your portfolio to use for opening trading positions. If the trading results go against your chosen direction, such as opening a long position while the trend is downward, it can lead to losses based on the margin amount you allocated for trading. If the losses increase without any action taken to close the position, the trading platform may enforce liquidation, resulting in the complete loss of your investment portfolio.

Therefore, the most important aspect of futures trading is proper money management in your portfolio. This involves minimizing the risk associated with trading, and limiting leverage to prevent excessive exposure.

Remember, getting the first step right is always crucial. If traders establish the correct mindset and understanding, their chances of survival and success in this type of trading are higher compared to those who have misconceptions about the approach.

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