Keep a Cool Head in Your Trade
In all facets of business, keeping a cool head is of the utmost importance to moving ahead successfully. Having an unemotional, objective approach to the business of Futures trading is not that difficult to maintain, that is until you actually place a trade with real money. At that point, our internal psychological resolve to remain unattached emotionally starts to creak under pressure at different rates for different traders.
We as traders are not robots, mechanical facsimiles of mankind completely replete of any emotion or concern. When a trade is placed with real money on the line, it represents the potential for future finances that will indeed affect our net worth at the bottom of the ledger. Rarely is there the person that has no concern as to what their bottom line happens to be each week, month or year. Even the richest of the rich are affected by the ebb and flow of their empires, that which is depicted by their bottom line. So naturally, we all will find our emotions tugged to some degree when it comes to our money.
Trading futures generates some degree of stress. The amount of stress is directly proportional to how one thinks in terms of money, winning and losing, and what degree of reward of punishment they assign to the results of their trades. The more importance we place on the outcome of our trades, on the both the positive and negative end, the more the results will affect us.
The amount of stress we place upon ourselves by how we think can lead to taking actions in our trading that can have a detrimental affect on the outcome of our trades. By adding unnecessary pressure upon ourselves, we may find ourselves cutting our profits short and letting our losses run. This can become a vicious spiral into a financial abyss, where our failures add additional pressure leading to even worse trading decisions, and so on.
Although completely removing our emotions from this business of trading is virtually impossible due to our dependency of money for everyday business of life, it can be kept relatively in check. One effective way of doing this is to use a technical approach to analysis, creating a trading plan that is based on a set of finite rules allowing for a non-emotional approach to trading. Instead of taking a trade based on a gut feel or what we think the market will or will not do, following a set plan of action based on a technical approach that has demonstrated its reliability over a satisfactory testing period, and having the discipline to follow that plan, you help reduce your reliance on emotion and let your trades have a chance to succeed without undue stress interfering.
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