Could This Be The “Huge Winning Trade” You’ve Been Dreaming Of?
Mental Fitness for Futures Traders
by Norman Hallett, former CTA/TraderIt’s why we all signed up for the battle against the markets. In the beginning, we read an article or saw a sales leaflet about a guy who took his last few dollars and parlayed it into millions in the futures markets.
It usually involved a simple secret that when revealed to you (for a few hundred dollars), you could have the same success. Most of the time, we would chuck the article/leaflet into the trash as garbage, but at some low ebb in our psyche, the article read like the answer to our prayers. Most of us joined the fray for the “big hit”.
Whether we 1-2-3-counted with Ken Roberts, waved with Prechter, or seasoned with Bernstein, we all soon realized that if we were going to stay in the game, we needed something more than desire and a dream… we needed a back-tested system that we could have confidence in. We realized that we needed to take our emotions out of trading and look at trading like a professional… like a job.
That doesn’t mean we can’t have fun, because winning traders enjoy their jobs like no others. So, we either adopted a guru, inspected his archives of trades (that’s back-testing, right?) and watched him/her live for a while before jumping in, or we bought software to test a system we thought could work.
Our system in hand, we saddle up to the computer. We have stops to defend against losing too much in one trade and we have limits to make sure we take our profits when our system tells us to. After a mix of trades over the first few weeks, we hit on a big one.
The news confirms that we are geniuses and we are quickly heading to our profit target. In fact, we’re just ticks away. Hey, this heat wave is bigger than anyone expected. There’s no way beans are not going to the teens! “I’ll lift my limit and keep my eye on it.” Market closes a 5 cents above the (former) profit target. “I’m getting good at this. I’m really developing a market ‘sense’.”
You decide you’ll put a stop right at your (former) profit target, so that if the market backs off, you’ll take your profit where you were going to anyway. (OK, reader, you know what’s coming). Rain in the plains overnight. Soybeans open 26 lower. Stopped out. Your genius turned a nice winner into a nice loser. What happened? The same thing that happened when you read that original ad that got you involved in all of this… You let your emotions take over.
If you’re still trading after a few years, it either means you have very deep pockets or you’ve learned to control your emotions and take every profit your system tells you to. You’re going to need them to overcome all the losses… and become the winner you know you can be.
TOP MENTAL TRADING EDUCATION BOOKS
Think and Grow Rich
12 Habatudes of Succesful Traders
Exceptional Traders - The Mind Game
The Disciplined Trader: Developing Winning Attitudes
The Investor's Quotient
Winner Take All: A Top Commodity Trader Tells It Like It Is
Disclaimer - I am not a commodity trading advisor. The information on this site is for trading education only. There are no trading recommendations for any one individual made on this site and this information is paper trades for trading education. All trades are extemely risky and only risk capital should be used when trading.
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.