PhD mathematician and “Market Wizard” William Eckhardt once claimed that emotionally, futures trading is a negative-sum game, and the only reason to trade is for monetary gain.
What does this mean? It suggests the discomfort of losing is always larger than the joy of winning. It suggests that trading will be extremely difficult emotionally, so traders had better at least make cash at it!
Let us take a look at some common trading feelings.
1. Fear
2. Exhilaration
3. Panic
4. Tension
5. Detachment
6. Doubt
7. Confidence
8. Audacity
9. Greediness
This is merely a fast list off the top of my head. Traders who’ve traded for any period have experienced most these feelings.
The difficulty is that each one of those feelings is hazardous to your money health. Every one of them can cause a reaction of thinking that is counter to lucrative trading. So what do we do? I suspect the answer is to be conscious of the disposition to slide into dangerous mental states if we do not vigilantly guard the psyche. We should set the game up beforehand to fall in the bounds of comfort. This suggests traders have done their research and have trading software in which they are one hundred percent assured. Part of this systems design includes risk governors that do not permit a trader to get in over his head. This foresight will give traders the confidence they require to cope with grief. Traders also have to have practical expectancies for profits. In spite of the occasional incredible luck of some, trading is not a make money fast business. Traders need to notice that trading is like breathing. Profits are equivalent to breathing in and losses are the equivalent of breathing out. As we all know, it is not possible only to breathe in, we would quickly expire! Traders need to acknowledge that losing is a perfectly natural, ordinary and welcome part of trading success. With the right mix of expertise, research, trading software and cash flow control, a trader can come to a place of poise and certainty. Not a certainty that any trade will or will not work, but a feeling of certainty that what he does is sound and he will at the end win if he simply remains consistent.
Commodity trading carries risks and is not suitable for all investors. Past performance is not indicative of future performance.
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