The ten fundamental rules recognized in the US futures industry are based on the insights and statements of veteran traders and experts. Below are the ten basic principles of futures trading.

Learn First, Act Later
A common mistake among beginners is entering the market without understanding what they are doing—they know little about the market. They seldom take time to observe how the market operates before risking their money.
In most activities, people observe before they act. If you want to learn to dance, you watch others first, then try it yourself. However, in trading, 80% of newcomers quit within 12 months. The main reason: they don’t start from the first step.

Traders should carefully examine every detail of their trading systems, understanding potential errors and the ways the system can succeed. This educational process should include clarifying trading motivation, strategies, execution methods, trading frequency, and cost—since commissions can quickly erode profits if trading too frequently.

When it comes to trading strategies and methods, you should also consider your own personality traits. Motivation is extremely important. Many successful traders persist in the futures industry for the long term because they genuinely enjoy trading. They do not let the desire for big profits cloud their judgment. Some successful futures traders believe that trying to make huge money is not a good motive for trading.

If you are using a trading system, you should repeatedly test it to determine its probability of loss. Traders must understand their methodological advantages, work habits, and professional strengths. If they cannot identify these advantages, they will be exposed to significant risks.

Cut Losses Promptly

When facing losses, act decisively to exit the trade and minimize further loss. Conversely, let winning positions run—an old but widely repeated trading maxim. Many traders stress this rule.

A common mistake among beginners is holding onto losing positions, hoping the market will reverse. Meanwhile, they tend to close profitable trades too early, eager to secure initial gains and missing out on further profits. They fear losing what they’ve already earned. Successful traders often use substantial gains from a few trades to offset numerous small losses.

Beginners usually rush to close positions as soon as they see a profit, preferring to take quick gains rather than let profits grow. To maximize returns, novice traders must learn to resist the urge to settle for small profits—a lesson that’s easier said than done.

Strict Discipline Is Essential

Traders who follow well-tested and disciplined systems consistently earn profits. In contrast, those lacking trading rules or consistency often fail. Indecisive or erratic behavior destroys trading opportunities. The benefits of a good system depend on perseverance; changing or abandoning a system after losses means you have no true system. Experienced traders note that giving up on a strategy after losses can mean missing its profitable turning point. Consistency in actions is crucial.

Focus Fully on the Trading Process

Veteran traders stress the importance of focusing on the entire trading process, not just on making money—even if this sounds counterintuitive. Leading traders acknowledge that losses are inevitable and form part of trading. Those who only focus on profits are more likely to lose, struggling to manage inevitable downturns. Their mood swings with profits and losses, sometimes leading to panic.

Experiencing emotional highs and lows during trading is not ideal; instead, one should calmly focus on the entire process. Futures traders cannot predict market direction or changes, but they can control how they trade—the process itself.

A major problem for beginners is fixating on profits and losses, rather than the process. Veteran traders say, if you fear losing money, why trade? Out of 10, 15, or 20 trades, it’s inevitable to encounter losses.

Know When to Exit

Traders must understand when to exit positions. No matter the system, knowing the right time to leave helps avoid indecisiveness and minimizes losses. Using stop-loss orders can reduce losses, but the market itself determines timing. Stops should be set according to market dynamics, such as average prices or lows, not arbitrary amounts or rigid rules. Exiting on mere hope the market will reverse often leads to more losses.

Manage Your Funds Carefully

Experienced traders recommend committing a consistent percentage of capital—such as 2% or 3%—to risk, and never changing it. Strict risk percentages differentiate professionals from amateurs, allowing for smaller trades during loss streaks and preserving capital. Avoid the temptation to risk more capital to recover losses; bigger risks usually mean bigger losses. Sound fund management involves spreading risk, maintaining position sizes compatible with capital, and knowing when to reduce exposure.

Follow the Trend; “The Trend Is Your Friend”

This is a saying repeated by veteran futures traders and a fundamental rule of trading. Successful traders believe the key isn’t predicting market ups and downs, but following prevailing trends. Many recommend riding the market’s major direction until it ends. The advice: never argue with the market, just follow where it leads. According to a renowned trader, the best profits come when there’s a strong trend, but not during choppy markets.

Don’t Trade on Emotion

Experienced traders warn against trading emotionally and stress the importance of a calm mindset—especially in futures. Losing trades often result from acting on emotion. Newcomers tend to become impulsive and inconsistent. Developing a method and sticking to it is crucial; if it’s effective, discipline and patience are keys to success. Good traders don’t become emotionally attached to positions or believe the market is “wrong” when it moves against them—the market is always right.

Consider Who Is Losing Money

Top traders often ask themselves who is on the losing side of their trades. Not everyone in the market wins; for every winner, there’s a loser. To profit, you must be on the right side of others’ mistakes. Trend followers typically profit from hedgers, who often sell in rising markets and buy in falling ones.

Always Stay Humble

Those who think they’re smarter or always lucky won’t stay that way for long—humility is vital in trading. If you’re not modest, the market will humble you. Famous traders advise against overconfidence, especially when you believe you possess unique or valuable information—chances are, others already know it too.