How Day Traders Can Limit Risk

Perhaps the most difficult method of aggressive speculation is day trading E-mini S&P 500 futures, yet that is the practice that tends to attract the lion's share of speculative dollars into the futures markets. Further, it is E-mini day trading that draws all of the attention and hype, and gets snake oil salesman excited. Despite the massive profit potential evident in the low margin and high volatility offered by futures day trading strategies, the reality is most attempts to profit are epic failures.

Losses are generally blamed on one simple aspect of day trading: risk management. The tool for risk management is the stop loss order. The dilemma is whether to use stop loss orders to prevent runaway losses, accepting frequent premature stop outs as an opportunity cost, or to trade without stops, eliminating the risk of being forced out of a good trade prematurely but accepting exposure to theoretically unlimited risk. This catch-22 has wreaked havoc on the accounts and minds of E-mini day traders for years. Yet, there might be a better solution: day trading with short-dated long options....1725 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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