For those who have read and understood the content up to this point, now is a good time to touch on this topic. The next sections will demonstrate what you may expect to find in the Members area and perhaps add some clarity to the previous sections’ narratives but, in advance of that, a few very simple guidelines worth noting.
- The materials in the Members area are designed to help with the daily market preparation process (U.S. Index at the outset, but with select U.S. shares coming soon). The statistically back tested strategies can be used as reference points before checking whether any visual validation is in place. Each day there will be a commentary giving our view on the current market status quo, but it is important that the member decides whether to agree with our analysis, or otherwise. As this is not an advisory service and trading decisions are made by subscribers alone, at points where either your own analysis differs from ours or you are not entirely comfortable with the general market situation, then simply DO NOT TRADE. Only consider pulling triggers once you are completely satisfied with the preparation outcomes.
- Each person will have their own risk appetite, but it is important to understand the basic concept of leverage / gearing. Trading Futures on a very liquid equity index may feel less risky than other more volatile instruments but when you consider how easy it is to leverage positions by multiples of the principal value at your disposal it can be very risky indeed. This leveraging is inherent within the futures contract itself as the trader only needs to put up a fraction of the actual full investment amount as a margin payment. The trader or investor really needs to understand the basic concept of leveraging, margins and exposure to appreciate the level of risk encountered. The natural attraction is the lure of greater returns; however, this must be coupled with the risks associated. The simple way to think of this is to consider the risk of ruin. If your position is leveraged 5 times i.e. your trade or position is 5 times larger than your principal account size (Plus the margin requirement), then it takes a 20% drawdown for your account to effectively be wiped out. Thinking more about how much can be lost is just as important as how much can be gained. For now, suffice to say that it is strongly advised to read more on this topic before proceeding.
- Once we move on to small equity trading portfolios, we will look more into risk management and how such portfolios can reduce risk through diversification but, for now at least, remember that more leverage equals greater risk. Never trade above your means. Spend some time reading up on these topics. Going forward, we will add more on this topic.