Money alone sets all the world in motion.”
Pubilius Syrus Maxims
1st century BC
Most people dream of being totally independent and self-sufficient financially. These
people spend millions of pounds on lottery tickets, hoping to be the lucky one to scoop
the jackpot. There is another way to make a million, the highly leveraged futures
markets. Everyone has heard stories of investors turning small stakes into vast fortunes,
and it is this chance that attracts traders to open futures accounts and dream, just like
the lottery ticket buyers, of receiving the big payout. The reality of futures trading is
different; the profits always seem to be elusive so each time the trader trades he suffers
consistent losses rather than consistent profits.
Trading looks deceptively simple, yet few succeed. If you read interviews with the great
traders, you will perhaps be quite surprised to learn that very few are intellectuals, many
have never been to college, and a considerable number even dropped out of school.
Additionally, most will claim they have simple trading systems that almost anyone can
understand.
So what separates winners from losers? The answer is not just knowledge of the trading
environment, but also an understanding of our personality make-up and how it needs
to interact with the market in order for the trader to emerge with consistent profits. In
the following pages you will learn why an understanding of our own personality is the
key to successful trading, and how the emotions of greed, fear, pride and hope are fatal
to trading success.
“A cloud does not know why it moves in such a direction at such speed, it just feels a
compulsion that this is the place to go now. By the sky knows the reasons and patterns
behind the movements, and you’ll know too if you lift yourself high enough to see
beyond the horizon.”
Richard Bach - Illusions
Take any price of any commodity and you will notice trends over a sustained period of
time, where the price moves in a specific direction for a sustained period of time. Many
analysts believe that prices are random and that trying to predict future price movement
is futile and doomed to failure. However, behind the seemingly chaotic price movements
there is order.
In the following pages I will give you an insight into how and why price movements
occur and how, over a period of time, you can capitalise on these moves and how you
can trade with the odds of success being firmly in your favour.
See enclosed reading list.
Any gambler will tell you that to make money you need to keep the odds in your favour,
and the same is true in trading, there are no certainties, only probabilities. To win, you
need to speculate when the odds are in your favour, so succeed you need to accurately
predict and play the odds. You need to know how to place your bets to maximise your
profits and keep your losses small. To do this you need a disciplined trading plan. The
following rules, if followed, will help you keep the odds in your favour, know and follow
the rules and you will succeed. If you break any of the rules you will end up losing
money.
“Luck, continued the gambler re ectively, is a might queer thing. All you know about it
is it’s bound to change, and it’s finding out when it’s going to change that makes you.”
Berte Harte - The Outcasts Of Poker Flat
We stated earlier that when we trade we confront an unstructured environment and, to
operate effectively, we need to create a structure for ourselves. The reason we need
rules is we need to combat the destructive emotions referred to earlier and give us
discipline. Assuming you have educated yourself and developed a trading method, you
will now need to execute it with confidence, entering and exiting trades in a consistent
manner. Without rules your emotions will dictate your decisions and lead you to financial
disaster.
