Disciplined Trading Psychology Separates Winners and Losers
Trading psychology? Sounds simple enough, doesn't it?
But that's a critical part of the success of a small percentage of successful futures traders...they've mastered the right trading mindset.
Master the psychology and the successful futures trading mindset,
and you'll be ahead of 9 out of 10 commodity futures traders...but that's far easier said than done.
This section of the site deals with the futures trading psychology. There are multiple aspects to this key trading success ingredient. You will learn about:
- Trading Psychology Overview
- Making a critical mental shift
- Risks of ignoring your trading psychology weaknesses
- Learning and consistently trading with key psychological principles
- Managing greed and discipline
- Trading in reality/being honest with yourself
- Acquiring the right trading temperament, and
- Trading with respect.
Trading Psychology Overview
Ever had any of the following thoughts or feelings:
- Dog tired of ending up on the losing end of trades...your account balance shrinking ever smaller...wondering if you'll ever figure out the futures trading Rubik's Cube?
- Frustrated with trying endless trading systems, strategies and back-testing programs, only to have trading success continue to seem miles, and dollars away?
- Wondering how - or even if you'll >i>ever>/i> - recoup those trading losses?
- Drawn to try futures trading, but afraid of the potential large risks?
- Demo-traded and analyzed numerous potential trades, but just can't
'pull the trigger'?
The good news is you're not alone.
All traders - and I mean ALL traders that have spent any time trading - have taken a ride on the same vicious emotional trading roller coaster - many times.
And the most have come away frustrated many times in dealing with the above examples of destructive and negative futures trading emotions.
These emotions can be thought of as being part of a traders' trading psychology....the thought patterns and feelings traders experience in planning for and executing trades in the commodity futures markets.
Another tidbit - ALL futures traders experience losing trades and
lose money.
And a relatively small percentage of traders
- (less than 20%, some say less than 10%) - have just learned to trade profitably...by effectively managing their emotions and trading psychology.
What the Pro's Know About
Trading Psychology
The experience of trading futures contracts and losing money on trades - particularly when first starting - is an unavoidable price of admission into futures trading.
You can't have winning trades without also have losing trades.
It's just the way this crazy game works.
There's a balance of sorts. Sometimes you can have more losing than winning trades, and still come out to the good - and this seems to be
the case more often than not with successful traders.
These more consistent futures traders have learned to turn things around, to trade smarter in a more disciplined fashion, minimizing their risk and losses while maximizing their trading profits.
They've learned the rules and made good trading psychology a key and central part of their everyday trading strategy and trading mentality.
We'll help guide you along that path here, but you need to recognize
one key aspect...
....ONLY YOU can choose to walk this path, and make trading psychology an integral part of YOUR trading strategy and trading mentality.
Minor Mental Changes = Major League Trading Results
Lets talk first about the a quantum mental shift that needs to take place before you start trading...or if you are already trading, a shift you may not have made yet...possibly because you were not aware of its' importance.
The game of trading is very much like the game of golf, from a mental perspective.
The difference in the golf pro's on the PGA Tour every week, and the top players who've not yet qualified to play on the PGA Tour, is less than one stroke each round, on average.
An average of just one measly stroke out of 72 in a round....for the privilege of playing for the big money.
So, what separates the pro's from the "almost" pro's?
It's very much mental - how the player thinks and runs his brain during
the game. His or her trading psychology if you will.
How well he/she controls their emotions, particularly negative thoughts
like fear and doubt, which can creep in after a bad shot or string of bad shots.
Sometimes overly positive thoughts can do just as much damage. Thoughts like arrogance, being careless, taking unnecessary chances/risks, and getting off track from sound fundamental play.
Bottom line? Trading psychology all starts - and ends - upstairs.
It all starts inside your head.
Slight changes, and the commitment to become just a bit more disciplined in preparation and play - - - more focused, and more emotionally balanced - - - can make the difference for playing for the big futures trading payday's or not.
Shifting Gears, Sharpening Focus
...Keys to the Psychology of Successful Trading
When it comes to futures trading, the psychology of traders' mental state, (a.k.a trading psychology<)...is not much different than that in golf.
Small, but very important mental shifts in how you play the trading game, can let you consistently play for potentially very large trading profits...
...or not much at all.
Like golfers hoping to qualify to play on the big Tour, by being just a little bit off your game, you can end up chasing trading fame and fortune
time and again, while not enjoying much of either.
So, how do you sharpen your mental approach to the game of trading, learn the sound trading psychology approach, ...to help put the
odds of futures trading success in your favor?
By learning and making several seemingly small, but very important trading "izm's" part of every trade you plan enter and exit.
We'll introduce and talk about those in the very next section below.
Look at these trading "izm's" as critical tools in your trading bag.
Memorize them and never enter/exit a trade without consulting them first.
That's one basic aspect of how you can start to master the winning psychology of traders approach, and put yourself on the road to trading more consistently and profitably......and ahead of 9 of 10 commodity futures traders who don't or won't do this.
Don't end up on the "qualifying" trading tour every year...working really hard, but for peanuts.
It's a lot more fun once you do what it takes and learn to master
the right mental aspects of trading psychology.
Then you can potentially have a lot more fun - and trading profits - pursuing your futures trading dream.
A Psychology of Successful Trading
- The Choice is Yours
The trading industry is rife with cliches and unique sayings...all built from the hard, harsh...and costly...experiences of numerous traders who've gone before you.
One suggestion? - Don't pay lip service to their experience.
Ignore the following simple, yet valuable psychology of successful trading tips, and wisdom of trading psychology embedded in the trading "izm's" we'll talk about below, at your own peril.
Doing so can cost (or make) you a bundle...or two...or three.
That much? Yes, really. More, actually. (Don't want to scare you,
but a little of that is good for getting grounded - and focused - in the futures trading game).
Some commodity traders have been known to lose far more than their trading account and accumulated profits.
Homes, entire bank savings, cars and marriages have been casualties of careless, undisciplined, edgy speculation and greedy futures trading
and resulting huge losses incurred.
There have been a few cases in recent years of commercial traders bringing down the entire trading departments or financial institutions they work for, due to ill-advised futures speculation on a grand scale.
Not "listening" to these failed trading voices of experience can be very bad for your financial health.
Becoming overly confident in trading successes...a weakness of poor trading psychology...breeds futures trading arrogance.
Don't make the catastrophic mistake of thinking it can't happen to you.
Crucial Futures Trading "IZM's"
to Live and Trade By
Read, embrace and burn the following future Trading "IZM's" deeply into your brain. Embed them into your own personal trading personality and trading psychology style.
And NEVER put on, manage or exit a futures trade without keeping the following trading "IZM's" uppermost in your mind.
A sound psychology of successful trading is built by incorporating each of the below "IZM's" into your futures trading plan and strategy.
Trading IZM #1: => Don't get greedy
Trading IZM #2: => Cut your losses and let your profits run
Trading IZM #3: => Bulls make money, bears make money...but pigs get slaughtered
Trading IZM #4: => The trend is your friend
Trading IZM #5: => Never marry a trade
Trading IZM #6: => You can never go wrong taking profits
Trading IZM #7: => Maintain a cold, unemotional, detached trading perspective at all times
What's that you say? You've heard all this before?
We're stating the obvious?
We'll I'd ask you in return....have you learned and mastered using this wisdom in your trading?
How regularly? And how successful and consistently profitable has your trading been to date?
If your answers are anything other than "Absolutely", "On every trade"
and "GREAT!"... you probably should brush up on a few of those "IZM's",
and re-double your efforts on those three fronts.
It'll help adjust your mental trading psychology and trading efforts in the right direction. 'Nuff said.
Greed and Discipline
...The Trading Psychology Gremlins
Let's talk about these two key trading psychology attributes...which probably cause futures traders to consistently lose money trading the commodity markets more than anything else.
Unlike the expression "greed is good" from the '90's movie 'Wall Street', GREED, and your potential inability to control it - will end your
online commodities trading career faster than just about any other trading sin.
DISCIPLINE - which permeates all the trading 'IZM's...is absolutely CRITICAL to develop if you have any real hope of making money in futures trading.
Doing the things you know you need to do, and doing them consistently...no matter how or what your emotions are screaming
at you to do otherwise...is a hallmark of top money-making traders.
Both attributes are extremely important to becoming a consistently successful futures trader.
Of these two trading 'keys', personally I think developing DISCIPLINE gets a slight edge over managing the GREED factor.
Why?
Learning and consistently exercising your trading discipline - will positively affect all aspects of your trading, including helping you keep
the GREED monster in check.
Fail to master them, and they'll control and defeat you.
Simple as that. But don't let their simplicity fool you. A winning psychology of successful trading starts with these two key futures trading attitudes.
With the importance of trading DISCIPLINE firmly in mind,
let's explore some other angles of how to pursue mastery of discipline.
Trading in Reality
Did you know the best selling book of all time is...the Bible?
But what does that have to do with trading?
No, I'm not going to start going biblical on you. I bring this up because one of the Bibles' teachings is directly applicable to trading successfully and profitably.
That is to 'know thyself'...a key part of successful trading psychology. Unfortunately many traders tend to fall into the 'kid thyself' category, some of us more than others.
We aren't always honest with ourselves when trading, finding it much easier to overlook (even deny) our shortcomings, while artificially inflating our perceived strengths.
Why? Because admitting the truth - about anything - and to ourselves, usually hurts.
Nobody wants to feel hurt. It's no fun. It's especially not fun being right when we have to face something unpleasant about ourselves, or our trading.
Far easier it is to look away or hide from that face staring back at us in the mirror, and pretend that everything is OK...or worse...delude ourselves into thinking a situation is far better than the reality.
But in trading, there is NO place to hide. It's a cold, stark, black and white (often "red") zero-sum game.
Unlike a "tie" in hockey, at the end of each trade, there is only one winner, and one loser.
Your trading account is the scoreboard, and doesn't lie.
It instantly reflects your trading success or failure. No 'smoke and mirrors" pretending or denial allowed.
That's trading in reality.
Handling Denial in Trading
...Be Honest with Yourself
Before you can have any real chance of financial success trading stock, commodity futures or options,you must master Trading in Reality first.
It's cold. It's hard. It can be costly. But, if you commit to 'knowing thyself', and get a a good handle on your own personal strengths
and weaknesses, learn and apply sound trading psychology principles...
...you can have a potentially more positive and pleasant futures trading
experience and life, than many other traders.
If you choose to kid yourself or ignore your personal weaknesses or shortcomings, refusing to face reality... you'll very likely end up taking a financial trading bath of sorts.
Deal in Reality...not denial or pretending...and face the music - no matter how hard or unpleasant.
Make the necessary changes to help improve your odds of commodity trading success.
That may mean determining you're not cut out to trade futures, and turning your interest somewhere else more appropriate. Just be 100% honest with yourself. You'll be doing yourself a huge favor.
Choose to deal in Perceived Reality as you'd LIKE it to be, rather than
how it really is...and the markets WILL make you pay.
If you're not mentally and psychologically prepared to play in this game, you place your futures trading stake - and potentially your financial future - at far greater risk of loss.
Remember..."know thyself". Truer words are hard to come by.
Do You Have the Right Trading Psychology Temperament?
Are you prepared for trying internal and emotional battles with yourself when the time comes to put your hard earned trading monies are on the line?
Why do some traders consistently take money out of the futures markets, when many other traders don't?
It's called Trading Temperament...and winning traders have developed
the right temperament, allowing them to trade more profitably and more consistently than most other futures traders.
They've mastered a winning trader psychology.
Winning trades are great! Everyone loves taking profits out of a trade.
But, can you stomach the downside - maintaining your strategy - especially when you're caught in a move against your position, or
after a series of trade losses? Will you fold like a cheap suit?
Are you more prone to a positive or negative trader psychology?
And can you learn to be cold, distant, dispassionate - in control of your trading emotions?
That last point, and one of seven trading 'IZM's' - maintaining a cold, detached trading perspective at all times - is central to building
the necessary character and winning commodity trading temperament
into your personal traders psychology.
Unfortunately, most traders never learn, much less master acquiring
the right temperament.
The Psychology of Successful Trading
Dictates Trading with Respect
The right futures trading temperament embodies several attitudes about successful futures trading and the commodity markets......and helps keep you on an even trading keel so to speak.
These attitudes are important to keep firmly in mind when trading, or thinking about getting started doing so. They include:
- Trade Respectfully - develop respect for the futures markets and the highly talented traders you'll be matching wits with.
- Trading is a Business - It's a profession, approach it as such. Commit to mastery. Read, learn, study, practice, educate yourself, and cultivate humility.
- Emotional Detachment - The market doesn't care about you or your trades. Don't get emotionally attached. Remain objective, emotionally neutral, well balanced. Do what needs to be done, when it needs to be done. 'Hope' has no place in your trading strategy.
- Consistency - Develop your overall futures trading strategy, then consistently follow it. Don't panic. Don't overrule it. Always trust your plan unless it gives you a very consistent reason not to do so.
- Don't trade FUD - No, not Elmer Fudd...Fear, Uncertainty and Doubt! Keep your emotions in check. If you find yourself in a heightened state of emotional trading anxiety, it's strongly suggested you temporarily step out of the market and cool down. Get settled down before re-entering futures trading with a more objective, detached and balanced perspective.
- Trading Account Size - Respect operating with the proper trading account size, to give yourself the best chance of commodity trading success.
Opening an account with less than $10,000 is not suggested.
$20,000 to $30,000 to start - - - and ONLY risk capital you can afford to lose - - - gives you a more realistic chance at success.
Trade smart. Respect having enough risk capital to start with.
- Sound Money Management - Risk no more than 5-10% of your total trade account balance on open trades at any one time.
Trade conservatively. Protect your risk capital. Respect the value of using sound money management in your futures trading.
So, there you have it. A mini-course on overall trading psychology and developing your own personal, winning trader psychology.
Remember...trading futures and commodities can be very profitable - or the markets can eat you alive.
Consider taking the more conservative, smarter approach...making the information here a key part of your futures trading psychology and strategy.
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