I doubt there is one non-rookie trader reading this story
who has not experienced at least a small run of poor performance in trading
futures. I've said before that most successful veteran traders have more losing
trades than winning trades in any given year. The key is maximizing profits on
the winning trades and minimizing losses on the losers.
I will also argue that at one point or another in most
traders' experiences, they, too, have felt like "lousy traders." I
certainly have. (Those who say they have never had a run of poor trading
performance or felt "lousy" about a trade or trades are likely either
lying or completely out of touch with futures trading reality.)
So what's a trader to do when losses start to pile up and
winners become scarce. Here are a few tips that I've picked up over the years
from some of the very best traders in the business:
Don't overtrade. If you are trading several markets and not
having any success, cut back to trading one or two markets. You can follow
fewer trades more closely and document your success or failures more easily.
Plus, your trading account won't be drawn down so quickly.
Keep a detailed trading diary. If you keep a good trading
diary, you can go back and see if there is a common thread among your
losers--and your winners, and possibly make the proper adjustments.
If you are not trading that many markets and still racking up
losers, take a break from trading for a while. Gather your thoughts. You may
want to "paper trade" for a while to get your confidence back. Then,
if you are still losing on paper, you will want to look for other trading
methods.
If you are losing money trading, DO NOT (I REPEAT) DO NOT
try to make a big home-run-type trade that will get you back to even or the
plus side in a hurry. In fact, do just the opposite. Make smaller trades that
risk less capital, until your performance starts to turn around and you can
resume your normal asset allowances for trades. Successful traders survive the
rough waters by hunkering down and being conservative.
Exhibit patience and discipline. I've preached about this
before. Are you following a trading plan that you devised before you put on the
trade? If not, you should be. You are not shooting from the hip (no exit
strategy in place) once a trade gets initiated, are you? If so, that could be
part of your problem. On the patience issue, are you impatient? I've talked to successful
position traders who may only trade a few times a year, because they wait for
what they feel is that "perfect set-up" to occur. If you are a
position trader (as opposed to a day trader), you don't have to be "in the
market" all the time. Wait for the good trades to develop and don't chase
markets.
Be confident. Have faith in your trading methods. And if you
don't have faith in your methodology, why don't you? If your methods are really
not successful, find something else. Read some of the many books out there by
the successful traders, and how they have traded successfully. But be cautious
of the person who wants to sell you some so-called successful trading method
for big bucks. (See the next item on hard work.)
Work harder. Don't expect to produce winning trades if you
are not working very hard at trading. Do you know well the fundamentals of the
markets you are trading? Even if you know technicals well, you should have at
least a good understanding of a market's fundamentals. Here's an example: Let's
say the charts and technical indicators look bullish for corn and it's the day
before a major USDA report. Smart traders likely won't initiate a trading
position in corn the day before a big government report is out.
In case you're wondering what I told the reader who emailed
me and told me was a "lousy" trader, here's what I said: Don't give
up just yet. The fact that he admitted he needed some help (before he lost all
of his trading assets) is a positive first step.
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