How To Become
a Commodity Futures Trader
25-Facts on
Successful Commodity, Stock & Options Trading
1. 95% of all Commodity Futures, Stock and Options
traders are long-term losers
2. The 5% that win at futures trading will earn the money the
95% lose trading since commodity futures trading is
a zero-sum game, whereas those 5% who win, floor traders and the
commodity futures exchange itself are the normal winners!
3. You must master three disciplines to achieve long-term
successful speculation:
-
Trading methodology (long or
short-term, technical versus fundamental analysis,
type of trading system, etc);
-
Psychological discipline (controlling
emotions of fear, greed and anxiety);
-
Money management (risk reword
decision analysis for each trading opportunity -
when, where, why and how to bet on a particular
event)
All three trader disciplines are necessary, but not
sufficient individually - only all three combined
are necessary and sufficient to achieve futures trading
success.
You must develop a trading personality which integrates
all three disciplines to achieve long-term success
in speculation. If you do not, you will fail.
4. 95% of commodity futures traders concentrate on
trading methodology and ignore disciplines two and
three. If you only focus on trading methodology and
technical analysis,
you will eventually fail in speculation. The only
question is when you will fail, not if.
5. Psychological problems are caused mainly by uncertainty
. . . which creates fear, greed and anxiety.
6. Uncertainty can be significantly reduced if the
futures trader has information and trading knowledge which
creates certainty rather than uncertainty. Certainty
reduces fear of the unknown, greed, anxiety, and creates
confidence and success.
7. 95% of traders are totally disorganized as to
analyzing their trading results . . . and have no
concept of how to organize their profitable and unprofitable
trades.
Practical organization of trading results is a primary
prerequisite in mastering the money management discipline.
8. Commodity
Broker statements provide absolutely no value
or practical use in mastering the three disciplines.
9. To master the money management discipline, the
trader requires information which is:
- a. timely
- b. accurate
- c. practical
All three tests are necessary and sufficient. Each
individual test is necessary but not sufficient.
10. Futures trading is just like running a business.
If you do not approach trading in the manner of a
successful business, (such as IBM, Sony or Apple Computers)
you will. Probably fail in the long run.
11. All three disciplines are inter-linked. If you
make progress in one of the three areas, the other
two areas will automatically improve.
12. 95% of all traders play as customers in a casino
and not as the casino.
13. You must play as the casino and not as a customer
to achieve long-term successful speculation.
14. The customer in the casino will always lose and
the casino will always win in the long run.
15. Long-term futures trading success can only be
achieved by playing a game with a positive expectation
- (or playing a negative expectation game which you
expect to become positive - a more risky technique)
16. The best approach to
commodity trading is to play a game where you
have a positive expectation and make small bets (playing
as the casino). The 5% of traders who succeed fall
into this category.
The worst case is to play a negative expectation
game and make large bets . . . Most of the 95% traders
who fail are in this category.
17. Before you make your first trade, you must establish
your risk profile approach towards trading (conservative,
moderate, aggressive). You must know who you are.
This risk profile will determine your approach to
the risk./reward decision making process.
18. Before you make your first futures trade, you
must establish monthly, quarterly and annual goals
for each profit center. These goals should be both
operating and financial goals.
19. Nearly every trader who is successful was a consistent
and/or heavy loser when he/she first began trading
(paying their dues), losing significant amounts of
capital in the process. This is a situation which
stems from the fact that traders focus on the trading
methodology and ignore the other two disciplines.
Losing significant amounts of capital can be avoided
if the futures trader is making a sincere effort to
integrate the 3 disciplines into his/her personality.
20. 95% of traders do not know where they have been,
where they are or where they are going in their trading.
They operate like a plane in a fog trying to fly with
no instruments. They are disorganized, uncertain,
anxious, fearful and eventually are forced out of
futures markets trading. If you follow this 95% group
of futures traders, you will you will eventually fail too.
21. The more you trade (day trading), and the more
sophisticated your
day-trading strategy and money-management is results
in trade discipline being more important.
22. The less you trade (long-term positions based
on fundamental analysis), the less sophisticated your
money-management and discipline need be.
23. You should classify any contemplated trade into
one of the following five categories before putting
on a new trade futures position:
- a. Entrance into congestion
- b. A trade within a congestion
- c. A breakout from a congestion area
- d. A trend run
- e. Trend reversal
24. The trader will have difficulty in formulating
a successful and intelligent risk/reward (entry/exit)
plan unless the trade is properly categorized before
the trade is taken. The risk/reward parameters are
different for each of the five types of trades.
25. Having timely, practical and correct information
of futurestrading results instantly available enables
the commodity futures trader to make rapid, unemotional
and informed trading decisions.
Trading will then be less victimized by emotions
and instead become more "scientific," unemotional
and mechanical. by Tom D'Angelo
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