Matching your mental make-up to a method of trading is possibly the most important aspect of trading to get right. There are many traders who fail every year simply because they force themselves to do things they should not be doing. Read on to see why and how you can find out what trading style is best for you!
Most new commodity futures traders begin their careers backwards. I know I did. We spend years studying the futures markets, THEN we discover the style of trading that best suits us.
I believe things need to be done in the opposite order. Consider FIRST going through a professional commodity trader psychological evaluation profile. You want to find out if you are a type A, short-term type person, or a more laid-back, type B, longer-term personality. Yes, I’m talking about a professional evaluator who psychologically profiles commodity traders.
Maybe you naturally like to make occasional decisions and then sit back for days and weeks at a time to watch a futures trade develop. Maybe you can handle markets going against you for long periods of time. If so, perhaps you are better suited for longer term commodity trading.
However, maybe you are a type A. This is someone who enjoys the faster action and immediate feedback of short term futures trading, and one who cannot handle sitting through losses for days on end. If so, then consider short-term futures day trading. Doing the opposite of your make-up is a sure formula for failure.
If you try to force yourself to do a style of commodity trading against your grain, you will likely find ways to sabotage your own trading to avoid it. No kidding. Just remember that you are competing against many commodity professionals who are ideally suited to do what they are doing. You must find your own niche to be happy, at ease and successful in commodity trading.
Personally, I went through a commodity trader’s psychological profile back in 1992 and found that I was much better suited for short-term trading. The evaluation cost me $300 (maybe $600 today) and was about the best trading investment I’ve made in myself. Beforehand, since 1978, I’d pushed myself to trade only long term futures positions. So instead of buying that next trading system or indicator, consider investing in yourself to discover this important answer.
Just because you may be better suited for short term trading doesn't mean you cannot trade longer term. It simply means you will have to work harder at finding and removing your longer-term trading kinks. It can be done. I still do longer term trades myself and so can you. It's just nice to know what kind of trading we are a "natural" for and to exploit it when we can.
Successful short term commodity trading requires time to pay your dues – to learn the patterns and habits of a specific market in real time. (More on this in future articles) Once you have memorized the major and more subtle patterns that signal probable market TURNING POINTS, only then do you have the mental reserve to go into an “autopilot” mode and day-trade using your powerful intuition. Intuition is simply tapping your accumulated knowledge on a subject.
Intuition is nothing mystical. Professionals do it all the time in medicine, law, engineering and so on. Unless you are able to tap it, you will probably remain near the bottom of your profession. This applies equally to commodity futures and option trading.
Part Two of Two Parts - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey - 27-year trading veteran, money manager and CEO of Thomas Capital Management, LLC. Get FREE, the complete 44+ lesson, "Thomas Commodity Trading Course" by visiting: http://www.thomascapitalmanagement.com/commodity/welcome.htm It's a brand new "street-wise" trading e-course. Get an edge trading futures, day trading e-mini's and selling options. Main site: http://www.ThomasCapitalManagement.com
