GAT=Good Attitude Trading
Psychology
of Successful
Commodity Futures Trading!
Many commodity traders attend trading seminars
to pursue their goals and feel better about themselves.
Many commodity traders are dissatisfied with certain
aspects of their lives, yet believe by obtaining
valuable trading knowledge and taking action,
they may improve the quality of their lives and
also get good trading results. In the process,
once a commodity futures trader becomes aware of
why they are trading the futures markets, their
attitudes become more positive as they increase
their levels of acceptance to new ways to trade.
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The Importance of being a Good Attitude Trader
- In the Wickapedia
World Information Center Knowledge Dictionary
a definition of "attitude," does not
mention "one's manner of acting, thinking,
and feeling showing one's disposition." The
first definition is "the position or posture
assumed by the body in connection with an action,
feeling, or mood etc." Webster's implies
that a person's actions and body posture expresses
his attitude.
A person's attitude is the way he looks at life,
and this is reflected in his actions and beliefs.
People who believe life and people are basically
good, have a positive attitude. The opposite applies
to a negative attitude. How is your attitude?
Your answers to two questions will define your trader
attitude. How is the world treating you? If your
answer was "good," then so is your attitude.
If your answer was "okay," or you took
a while to answer, then your attitude is about
average.
If your answer was "badly," here is
another attitude question. Do you expect good
things to happen in your life? If the answer was
"yes," then your attitude is good. If
your answer was "no," then you should
definitely not trade high-risk financial markets.
There is a strong correlation between expectations and
the traders trading results and end-of-day P&L.
If you expect negative results, then that's exactly
what you will get with ongoing trading losses.
A person who expects negative things to happen
in his life has a losing attitude, and is labeled
a pessimist. Instead of dwelling on the future
opportunities for financial success, the pessimist
looks to past failures as justifiable excuses
for not making an effort to move forward with
his life. The worst psychological aspect of being
a pessimist is that the possibility of positive
behavioral change has been eliminated.
To the pessimist, a glass of water is half empty,
but to a Good Attitude Trader with a positive
attitude, who is an optimist, the glass is always
half-full. The optimist expects good things to
happen in his trading and personal life, because
he is willing to take responsibility for events
which occur in his life. The assumption and acceptance
of personal responsibility is the key difference
between optimists and pessimists, and between
a successful commodity futures trader and those
unsuccessful at commodity futures trading.
Good attitude trading does not guarantee commodity
trading success, but little success in life would
be achieved without a person believing in positive
results from their efforts. A (GAT) Good Attitude
Trader finds new profit opportunities in the midst
of failure, and is considered to be the psychological
foundation from which all success is possible,
including successful stocks and
commodity futures trading for the "GAT"
trader.
Think about this for a moment. Do people attempt
to achieve goals they absolutely know they can
not achieve? Or do people attempt to achieve goals
they believe are within their ability? A person's
probability of success is directly proportional
to the belief in his own abilities.
Expectations create attitudes. When the nation's
100 largest corporations had their CEO's list
the psychological characteristic they felt most
responsible for their success, 92 of them placed
the word "attitudes," as their first
selection. High levels of peak performance and
positive attitudes elevate one another to even
higher levels, but the positive attitude usually
preceded the actions.
The Cosmic Law of the Universe- There is one
immutable Cosmic Law of the Universe, that has
many different applications, "for every effect
in life, there is a cause." This is sometimes
called Socratic Law, since it was observed by
Socrates over 400 years before the birth of Christ.
The Bible recognizes this law as the "Law
of Sewing and Reaping." It is recognized
in physics as Newton's Second Law of Motion, for
every action there is a corresponding reaction.
Ralph Waldo Emerson called this the "Law
of Compensation," given in his essay with
same title.
Cosmic Law states we live in an orderly universe,
which has specific laws that lead to success.
For every effect there is a cause or series of
causes that preceded it. If a person wants to
achieve a specific effect, the individual needs
to institute the causes to achieve the desired
effect.
The Law of the Cosmos applied to individual psychology
and trading states, "thoughts are causes,
and conditions are effects." Winning and
losing stock market and futures trading, and trading
success or lack of it, are direct causes preceded
by actions, or inaction's, which were in turn
preceded by thoughts.
Expectations define attitudes, and attitudes
dictate actions for any given set of conditions.
Commodity trader success is basically knowing
what commodity trading actions should be taken
in any set of technical circumstances, and developing
the iron-willed self-discipline to take those
actions.
By the way, Socrates believed an idea could change
the world, and taught this to Plato, who was the
teacher of Aristotle. (Fortunately, Plato wrote
down the teaching of Socrates, who never recorded
his lessons.) Aristotle was the teacher of Alexander
the Great, who conquered the world.
The 4 Steps to Commodity Trading Success - Only
one person can give you commodity futures trading
success, and that is you. The most difficult step
to success is the first one, which is total commitment
to achievement of a specific goal. Commitment
to achieving a specific goal is 51% of all trading
success. It is very important for each person
to decide what, and why and when a person wants
to achieve any goal before making any commitment
to trading the stock, options and commodities
markets.
The second logical step to successful goal achievement
is to acquire the commodity trader education needed
to obtain the goal. Doctors go to medical school,
attorneys go to law school to receive the education
necessary to practice their trades. Successful
traders must seek out educators, and try to learn
from their instructional presentation of trade
materials.
The third step is what Einstein labeled the most
important step to achieve success - action! "All
the knowledge in the world is useless without
the ability to take action," as Einstein
pointed out. Step three applies the knowledge
obtained in step two to real world situations.
There are several kinds of Commodity Futures
trading education, learning obtained from commodity
trade books, commodity trading seminars, commodity
trade schools, even active participation in a
university for futures
trading or a commodity daytrading school.
Plus, trading knowledge obtained from the experiences
life teaches. Formal education may or may not
teach you how to trade, but allows the commodity
world's traders to learn from the commodity trade
mistakes of others. This is a good learning experience,
since it would take the trader a long time to
make all the same mistakes. Education from real
life trading experiences teaches an individual
survival instincts.
The final step to achieve commodity trading success
is to apply analytical evaluation to the actions
taken in step three. This places emphasis on repeating
actions that produce the desired results, and
examines closely what does not work. Once the
reasons are clearly understood why some technical
actions do not produce desired results, they should
be adjusted, improved, or discarded.
Commodity traders have learned the value of a positive
and winning attitude, and how important it is to have
a game trading plan to achieve trading success. This
financial trading article on the basic psychology of
successful trading may leave you with a false impression
that achieving trading success is an easy process.
Not so. Unfortunately, three powerful negative
emotions stand in the way of successful trading;
fear, anger and guilt. These deeply internalized
and intertwined emotions undermine trader's development
of self-discipline, a vital necessity for a traders
trading success.
General George Patton stated, "a warrior's
greatest asset is self-confidence," this
comes from self-discipline. Understanding how
the 3 negative emotions relate to trading, and
managing their negative effects, so self-discipline
may be achieved.
There are two types of education: learning obtained
from books and seminars, and knowledge obtained
from the experiences that life teaches. Formal
education may or may not teach an individual how
to trade, but allows the trader to learn from
the mistakes of others. This is a good learning
experience, since it would take the trader a long
time to make all the same mistakes. Education
from real life trading experiences teaches an
individual survival instincts.
The final step to achieve commodity trader success
is to apply analytical evaluation to the actions
taken in step three. This places emphasis on repeating
actions that produce the desired good results,
and carefully examines closely what does not work.
Once the reasons are clearly understood why some
technical actions do not produce desired results,
they should be adjusted, improved or discarded,
This basic approach of how commodity traders
reach commodity trading success may leave the
reader with the false impression that trading
profitability is an easy process. Not so. General
George Patton stated, "a warrior's greatest
asset is self-confidence." This demands knowing
what should be done, and why it should be done.
This will be presented later, when I will examine
the reasons that prevent most people from achieving
success, and what can be done about correcting
them.
The importance of a positive attitude, the two
most important psychological laws, and the four
steps to achieve trade success have laid the foundation
for understanding the nature of personal change,
why most traders lose money, and actions responsible
individuals take to correct losing behavior.
The Three Reasons Why Most Commodity Traders
Lose - One way to change from a losing commodity
trader to a winning commodity trader is to change
the thoughts that preceded the actions responsible
for the losses. It is difficult to alter the habitual
thought processes that have embedded themselves
deeply in a trader's personality over a number
of years, due to the powerful influence of three
intertwined emotions: fear, anger and guilt.
Fear is an emotional state of anxiety due to
the presence or perceived presence of danger.
(Stress is often defined as anxiety from an unknown
source.) Each newborn child has only two natural
fears- fear of loud noises, and fear of falling.
Most fears produce learned behavior to a specific
set of conditions, called conditional responses.
Pavlov pioneered this research with dogs in the
1920's, then B.F. Skinner with human beings and
animals in modern times.
Fear often impairs the rational trade decision-making
process by emotionally relating the possibility
of past financial losses to the future. Fear often
immobilizes the trader's decision-making process
resulting in no trading decision, or a delayed
incorrect trading decision response.
Fear will elicit a trader's "flight or fight"
response when he is confronted with methodology's
trading signals. The trader will either take actions
as demanded by his trading methodology, or remove
himself from the presence of danger. An acronym
for Fear may be "false expectations appearing
real." Attitudes determine actions. Commodity
Traders with positive attitudes have positive
expectations, and take decisive goal-directed
trading actions despite fear.
The winning financial markets trader accepts
the possibility of commodity trade losses or mistakes,
yet has the self-confidence to take action despite
fear. Winners manage fear, and losing traders
are controlled by it. The greatest mistake is
to fear making a mistake. Commodities, Options
and Stock Market trader profits are heavily based
on knowledge of what works and what does not work
well or fails. Managing fear and accepting mistakes
are an essential part of the trading educational
experience that makes success possible. Winning
traders learn from mistakes, losing traders repeat
them.
Self-confidence naturally develops from self-discipline
as a commodity trader learns what actions should
be taken from a given set of technical conditions.
The more accurately a trader interprets price
action, the better his trading results should
be. Thought precedes both emotion and action,
yet thoughts combined with emotions determine
actions. Self-confidence comes from believing
in one's abilities, assessing and accepting risk,
then taking actions. The winning trader knows
personal or financial growth is impossible without
risk assumption, which is part of an educational
process.
Only emotionally healthy commodity traders can
adequately assume risks, because losses must be
emotionally and financially acceptable to each
individual trader. Each commodity trader must
define their own thresholds of pain for each,
and develop the self-confidence to accept them.
Fear of being wrong may be more important to a
trader's ego than fear of sustaining a financial
loss.
In a similar manner, many traders can't accept
financial success, because it does not conform
to their negative self-image as a losing trader.
There are various ways fear can be creatively
used for financial destruction by the losing trader,
but the one common denominator is allowing fear
to control trading actions.
It is important to analyze fear and determine
its origin to learn why it is being experienced.
Most fear is based on irrational beliefs adopted
years ago. If fear of losing money is causing
anxiety or loss of self-esteem, the trader may
wish to simply stop trading until this fear is
understood and positively accepted as part of
the trading experience. Traders should never borrow
money to trade, or risk money they can not afford
to lose.
While fear may immobilize the trade decision-making
process due to financial losses that may occur
in the future, guilt may immobilize the trade
decision making process due to financial losses
that occurred in the past. Guilt emotionally associates
past financial losses, and any negative emotions
experienced with them, to the present decision
making process.
Guilt is a form of self-punishment, a recrimination
today for something that happened yesterday. There
are two common commodity trading mistakes that
the beginning trader makes that often lead to
experiencing quilt:
Incorrect price action analysis before entry,
and failure to adhere to trading discipline while
the trade was active. These common commodity trader
errors often lead to an unacceptable risk-reward
assumption before entry, a delayed incorrect entry
price and/or protective stop placements, poor
stop re-adjustments, and taking profits or exiting
losses prematurely.
The most important technical analysis aspect of commodities,
stock market, forex, options and futures trading
is knowing at what price the initial risk assumption
is incorrect. A trader who does not know at what
price his technical
analysis is incorrect does not deserve
the trading profits even if his trade is making money.
Before a commodity trade is initiated, an acceptable
trade risk-reward-ratio must be defined by the
trading methodology. A protective stop loss order
must be placed upon trade entry, then readjusted
according to the trading discipline until the
method determines the commodity trade is to be
closed.
A winning commodity trader is a winner before
the trade is initiated, while the trade is active,
and after the trade is exited regardless of the
result to the degree he adheres to his trading
discipline. There is no logic-based reason to
ever experience guilt so long as the trader has
executed the actions demanded by his trading discipline.
Once a trader psychologically and financially
accepts the worst outcome that may occur and does
all he can to prevent it, fear and guilt become
intellectually useless emotions.
Anger is a hostile emotional response either
inwardly directed, or outwardly expressed towards
others. Anger may result from confrontation with
the guilt or fear aspects of the trade decision
making process, or negative trading results and losing trades.
Rational trading decisions are very difficult to make when
the brain is processing anger, due to physiological
and psychological reasons.
A commodity trader may choose to ignore a signal
due to a recent loss, fearing another trade loss
will result. If the trade makes money, guilt and
or possibly anger is experienced for not taking
the trade. Guilt is a natural response after anger
has been vented. If the trade loses money, the
trader feels justifiably rewarded for not taking
the trade thus making it more difficult to execute
the proper trading discipline required for his
next entry signal.
Does this mean there is no subjective aspect
to commodity trading? Burton Pugh, who wrote excellent
technical analysis trading commentary in the 1930's,
stated "forecasting prices is a science,
but trading is an art." Only a master trader,
who can technically justify reasons for ignoring
a trade, should override trading signals. One
of the Calhoun Four Automatic Trading Rules, "always
look to buy a market oversold into support,"
is expecting a sharp currency move, and current
system sell signals are not being taken.
Resolutions to Solutions of Fear, Anger and Guilt
- Four basic actions allow traders to manage fear,
anger and guilt. First, forgiving one's self for
past losses. Second, forgiving others associated
with past trading experiences. A person is mentally
healthy to the degree he may forgive himself and
others. Forgiving one's self for past trading
losses resolves guilt. Third, asking forgiveness
of others who may have been injured from the trading
experiences. Lastly, vowing to take full responsibility
for all past and future losses.
The four-step resolution process allows any trader
to begin to heal emotionally. By intellectually
accepting the past, traders may view their actions
with a new positive perspective. The past can
not be changed, but its perspective must be changed
from a negative experience whereby the trader
sees himself a victim, to a positive learning
experience that will allow the trader to achieve
success. Until a trader positively resolves his
past, he will not accept important learning experiences
yet believe he is a person unworthy of success.
Resolving the past demands taking total responsibility
for it, and personal commitment to not repeat
the same commodity trading mistakes.
Recognizing a problem exists is necessary before
resolutions can be examined. Anger is a financially
self-destructive emotion that exacerbates fear
and quilt by obscuring solutions to them, while
creating itself as another problem. There is no
such thing as justifiable anger related to the
trading process. If a commodity trader can financially
and emotionally accept losses, execute proper
trading and self-discipline, the powerful negative
emotions of guilt, anger and fear should not become
part of or create commodity trading problems.
The relationship of fear, anger and quilt is
a very complex subject matter. The psychological
problems of losing commodity traders can not be
expected to be adequately resolved in a cursory
discussion of this nature, however all resolution
to a commodity trader's psychological problems
must consider the key aspects presented in this
work. Once traders make the critical adjustment
from a losing to a winning trader, they often
come to realize the psychological aspects of trading
being equally important as correct price action
analysis.
A degree in psychology may be more valuable than
a degree in economics for a professional trader,
because markets are value based yet emotionally
priced. Understanding the psychological perceptions
of market traders correlates directly to the what
and how prices are recorded for any stock or commodity.
Preventing Future Psychological Trading Problems
- There are many successful g.a.t. commodity trader
trading methods and trader approaches, but all
of them demand the financial market trader develops
a positive relationship with financial risk acceptance.
Traders to whom money represents self-esteem or
security suffer unduly when losses are sustained,
because they see themselves as being punished
by forces beyond their control. Professional traders
do not spend time lamenting the money they have
lost, they express gratitude for the many blessings
they still possess. Again, a positive attitude
makes the difference between winning and losing,
or some cases even heaven and hell.
A samurai swordsman went before an esteemed Zen
master and shouted in the temple he wanted to
learn the difference between heaven and hell.
The master looked at the samurai and shouted,
"you mean they let a big, ugly fool like
you become a samurai swordsman?" The samurai
quickly drew his sword raising it high above the
master's head. The master calmly raised his finger
and pointed to the samurai's eyes, and said "that
is hell." Slowly the samurai sheathed his
sword, nodding his head as he knelt before the
master, placed his hands together then bowed.
"And that is heaven," stated the master.
Understanding and correctly analyzing price action
is absolutely necessary before trading success
is possible. Yet even with profitable trading
methods, traders must develop a positive relationship
with themselves, others and their trading environment
before success may be achieved. The professional
commodity trader recognizes no one else may give
him success, he must earn it by careful preparation,
proper execution of trading discipline, and careful
analysis of commodity trading results.
Commodity Trading decisions based on scientific
analysis of price action make statistically accurate
price forecasts possible. Placing a protective
stop loss order to exit the market at the price
the initial risk analysis is incorrect is the
best psychological asset. Even if the trade loses
money, the trader adhered to his trading discipline.
Statistically, a trade 60% accurate with payoff
equal to losses may risk 5 percent of the total
capital with only a 0.0085 probability of financial
ruin.
Failure is a good teacher only to those who possess
a positive attitude to learn the valuable lessons
from their mistake. Accurate execution of commodity
trading discipline requires a protective stop
placement on order to avoid failure, and diminish
the negative psychological effects of fear and
guilt. Self-discipline demands doing what should
be done, when it should be done, whether or not
a trader wants to do it. Self-confidence is born
from self-discipline, and makes the risk acceptance
process acceptable because potential commodity
losses are acceptable.
Developing a positive attitude like in Good Attitude
Trading is also essential for
human beings to successfully live life and achieve
their maximum potential, since all other higher
human values come from it. Respect for truth,
honor, dignity, honesty, integrity, courage, loyalty,
patriotism and wisdom is cultivated by an individual
who recognize these values not only enhance the
quality of his life, but the lives of all he encounters.
His attitude states others are worthy of these
values, just as he possesses enough self-worth
to expect them to be returned.
The Green Bay Packers had three very basic plays
they ran over 80% of the time. These plays reflected
Vince Lombardi's winning philosophy and he expressed
it very simply. "Son, the only thing you
can do is to get off your ass and stop feeling
sorry for yourself and do it! Work out your method.
Work out your system, and execute it." Was
Lombardi talking about playing football or perhaps about
commodities futures trading? This simple game-plan
philosophy inspired the Packers to
two consecutive NFL Super Bowls. Not bad advice
to conclude my "Psychology of Successful
Commodity Futures Trading article" for all GAT Traders!
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by Webtrading®
1996-2008. Reprinted with Permission of Webtrading.com
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