by Rick Ratchford
People trade the Futures, Commodity and Forex markets for various reasons. Perhaps what appeals to you is that of complete control. You make all the decisions and can see immediately whether they are good are bad ones.
Perhaps you like the idea of working at home in your bathrobe, instead of having to get all dressed up each morning and fight traffic at a 9-5 job.
Or maybe you like challenges. To pit your wits and skills against that of thousands and tens of thousands of others.
Or maybe it is a little of all of these, including having continuous opportunities to make a very large amount of money anytime you feel like it.
Trading offers so much. Depending on your own decisions, you have unending opportunity to pluck out thousands of dollars at will. You decide when you want to trade, how much to trade, what to trade. You are in full control. Make all the right decisions, and you walk away a much richer person.
The freedom trading provides is attractive. The amounts of money out there just for the taking is attractive. You know the markets are ever-moving, ever-flowing, thus all you need to do is jump in and let the market take you along for the ride. At some point, you decide when to jump out again with your bounty.
Everything stated above is true. While the saying goes that "opportunity only knocks once", in the world of Futures, Commodities and Forex trading, opportunity "knocks every second, every minute, every hour".
It is absolutely amazing the limitless opportunities before every single trader. If you have a trading account, you have before you a door to unimaginable opportunities. All you need to do is open that door and recognize what is before you.
The markets can be likened to "money on trees". It is there and only needs to be retrieved by those who are willing to reach up and pluck them.
Now while all this is indeed a fact, only a small fraction of those lured into trading actually get to experience trading in such a way. Most traders are actually attaching the money to the branches so that a small minority of traders can come at will and pluck as much of it as they desire.
Recognizing the opportunities before you that comes with trading is only the first step. Nothing as fantastic as these opportunities simply fall into your lap. You must be willing to do what it takes in order to get your share.
The most important thing you must do deals with the psychology of being a trader. It is the "mental aspect" that you must deal with. The result you want to achieve here is that you are not concerned about being wrong or losing money. This is also the most difficult to master, and so the sooner you embark on doing so the better. I'll leave this aspect of trading to you to research further on your own.
For now, I will address the next and very important aspect to trading. This would be the understanding of probability and that of risk control.
Aside from trading psychology, understanding probability and risk control important if you want to start pulling cash off the money tree at will. You must learn how to determine the probability of a market decision as well as estimate what your risk exposure will be. Once you have learned to do this, you will find yourself making fewer bad decisions and many good ones. You'll build your confidence which can only help you towards mastering your trading emotions.
Over the last 16 years of my trading experience and as a market forecaster, I have learned that the better you are at timing your trades the less pressure you will feel. In time, hopefully, you will no longer feel any pressure at all for any and all your trades. Pressure, believe it or not, is a sign that you do not have full confidence in your decision. In short, you are lacking faith in what you just did or are doing. But you have to start somewhere.
There are no guarantees in trading. You are not assured to be 100% every time you put on a trade. The winning trader understands and accepts this without question. He knows that he will be wrong from time to time no matter how much of a timing expert he is. So when wrong, he will simply accept the loss and move on as it is no big deal. He knows that at the end of the day, he will be on top because of this detachment to being wrong and losing some trades.
Becoming a good market timer is very important if you are going to have more winners than losers. And although it is not the number of winners to losers that will make you net profitable, as many lose more and yet make money anyway, it helps to increase the winners to the best of your ability. It is simply a great confidence builder and it also allows you to risk less on every trade.
Where does less risk exist for any trade? Because the markets repeatedly form swing bottoms and tops (some call these pivots), and these swings tend to form ladder patterns we call trends, the closer we can enter these swing bottoms when buying or swing tops when selling will allow us to place our stop-loss orders closer to our entry price. The probability of a swing bottom or top holding is always greater than not. You want probability on your side, so buying swing bottoms in an up trend or selling swing tops in a down trend is always going to put the odds on your side. Getting in as close to a new swing bottom or top is only going to make this that much easier, and allow you to narrow your risk exposure.
As a market forecaster, my job is to forecast these swing tops and bottoms in advance for my clients. In addition, providing guidance on how to enter close to these forecasted swings are also provided. Once the client recognizes by repeated successes that the swings are in fact occurring where specified, confidence in taking trades increases. It is a step in the right direction.
In the early phases of training and building this confidence, the trader may be hesitant to act on trading opportunities. But knowing when to expect a top or bottom in alignment with the trend will help the trader pick and choose which market has a lower risk situation in order to test the waters. In time, more trading opportunities that may expose the trader to a little more risk may be attempted, once confidence has grown and emotional attachment is becoming less and less an issue.
Trading just a small percentage of an overall account will also help give the trader time to build confidence when working on trade timing and the mental aspect of trading. Precision timing and not over-trading can only give traders of all experience levels a clear edge to improve and become consistent winners.
There is nothing like trading. No matter what your occupation may be, trading simply is like having a money tree in your backyard that you can at anytime go out and pluck money from. You simply need to have the confidence to do so, and knowing when to expect future market tops and bottoms in advance is an excellent way to help build that confidence.