GAT = Good Attitude Trading
The Psychology of Making Money Successfully
Trading Commodity Futures & FX Markets
Many commodity futures. stock and forex traders attend trading seminars to reach financial goals. Many traders are not happy 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 commodities 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.
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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.
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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 start causes which will achieve the desired goals.
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 profits, and that's 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 financial 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 day trading 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 futures 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 trader 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.
A winning financial markets trader accepts the fact commodity trading losses or mistakes will happen, 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 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 overall 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 3 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 Futures Traders!
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