Pulling the Trigger

All the analysis and price forecasting in the world is worthless if the trade is never initiated. The psychological factors involved in trading are greatly neglected or misunderstood by many. Whether it's fear, anxiety, past experience or the general psyche of the trader, many traders have trouble taking the trade when all the conditions are correct and a low risk trade signal is generated.

Trading psychology is discussed in greater detail in the book:
Investment Psychology Explained by Martin J. Pring
This is one of the few books that I recommend all traders should read.

 

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The best piece of advice I can give here is to formulate a trading plan or objective and stick to it. Establishing a trading plan maximizes your objectivity and minimizes emotional trading. For example, once risk to reward ratios are at least the recommended 3:1 range or better, stoploss levels are set and the trade signal is generated, the technical trader should execute the trade without fear. Keep in mind traders who follow these parameters need only be right 40% of the time to have profitable trading experiences. The fear of losing money will keep you from ever making money in the futures markets.

I can not stress enough how important timing is at this stage of the game. Keeping up with daily price movement is critical in helping eliminate anxiety from your trading. The fear of missing a move or jumping into a trade days after the signal has been given will only lead to emotional trading, and usually losses. If a signal has been missed by a few days, there are two things the trader can do. Be patient and wait for a correction that will bring prices back to the break out levels or chart level where the initial signal occurred. However, timing the second move is usually more difficult than taking the first signal. Or the trader can always save their capital for another day. Don't ever feel like you have to be in the market. There will always be another trade opportunity down the road.

Personal temperament plays a key role in your ability to execute under the pressures of the futures markets. You must search your soul and discover your ability to tolerate risk, find a level at which you are comfortable at, and then incorporate that into your trading plan or methodology. It may be unrealistic to expect a high rate of return, but it is even more unrealistic to expect such a lofty performance if you can't handle or live with the pressures and price swings of the market.

Finally, I strongly believe that your life circumstances outside of the market place will great affect your performance in the markets. If your are psychologically run down due to illness or personal problems, the chances are that you will not be able to withstand the psychological turmoil that the markets will cause you. Therefore, whenever you are feeling overly stressed because of events outside the markets, it is a good idea to stay away or to make as few decisions as possible concerning trading until your overall wellbeing has improved.

People who trade futures because they desperately need to make money, usually don't. Others who use the futures markets to fulfill a need for risk and excitement would be better off in Las Vegas. Commodity futures trading does offer the potential to make money, but your mind has to be in the right place and you must be able to execute your strategy or you'll be part of the 80% that lose money trading.

Most of all, relax, have fun and make smart trades.

Trend Lines | Stochastics | 1-2-3 Formations | Pulling the Trigger

 

Futures trading involves risk and is not suitable for some investors. In no event should the content of this web be site construed as an express or an implied promise, guarantee or implication by or from Chris Kraft or Rosenthal Collins Group, LLC. that you will profit or that losses can or will be limited. No such promises, guarantees or implications are given. Past results are no indication of future performance.