2. The 5% to 10% of futures traders who are winners in futures trading will earn all the money of the 90% plus traders who lose since commodity futures trading is basically a zero-sum game, whereas the winners include insider-traders and the commodity futures exchange itself are the more normal winners.
3. You must master at least 3 areas to achieve long-term profitable trading the markets:
All 3 trader disciplines are necessary, but not sufficient on their own - only all three combined are necessary and sufficient to achieve futures trading success.
You should develop a sound trading plan and persona which integrates all 3 areas to achieve long-term success in trading. If you do not, you will very likely 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 you will fail.
5. Psychological issues derive from uncertainty, which creates fear, greed and anxiety.
6. Uncertainty can be significantly lessened 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. Rhetoric and words coming from a full-service Commodity Broker or marketing terms from a Discount Commodity Broker offers traders no actual value or practical use in mastering the 3 areas.
9. To master the money management discipline, the trader requires information which is:
All 3 tests are necessary and sufficient. Each individual test is necessary but not sufficient.
10. Futures trading is 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 90% or more 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:
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
for VT.ORG The Virtual Trading Resource to get
on the winding road to winning futures trading starting today