I would like to share a quick story with you about a good friend of mine who started trading momentum stocks about three months ago and how it lead to her using a futures trading system.
Here is some interesting things you may now have known about individuals and the success as a trader. Over 95% of traders will fail to make consistent money and grow their account year after year. And the more successful the indiviudual has been in the past in other aspects of their (a professional of some sort), the most likely they are to struggle at trading.
I have worked with over 8500 individual traders since 2001 and see the same mistakes happening over and over again by individuals.
Those who win a lot of trades and make a lot of money early on in their trading career typically are the ones who lose the most money over the long run and are forced to quit trading. And unfortunately the brutal truth is over 26% of traders I have surveyed said that their spouse demanded that they stop trading because they were lose to much money and in most cases it was their nest egg capital.
Long story short, thos who get involved in trading volatilite momentum stocks and make a long of money will become addicted to the big gains and exciment that comes with positive results. The problem is that when the market turns and their strategy no longer works they end up giving back all their gians and then a lot more in a fraction of the time it took them to make it.
I got out of trading individuals stocks for the most part because I found them to be more work to find, track and manage, They also carried a lot more risk than if you were to say trade the SP500 index.
Personally I prefer trading the indexes like the SP500 and NASDAQ. Why? because they provide diversification and stability in price compared to high flying stocks that move 5-20% each day.
The Problem with Index Trading & Why You Need A Futures Trading System
The problem with index trading is that they move slow and most individuals find it to slow and boring. But remember, with slow and boring moving markets comes stability, reduced risk, and larger amounts of investment capital can be put to work vs holding 7-15 individual stocks.
The solution is to use futures on the index you want to trade. A futures trading system provides you with roughly 17X leverage on the SP500 meaning that 1% move in the index can make you 17% return on your money. The leverage cuts both ways, but if you subscribe to a proven futures trading system (automated futures trading system, or a futures day trading system) you can risk less capital, and more more money.