Trend Following Psychology
One of the most important issues of succeeding in commodity trading is the the idea of Psychology. More specifically Trend Following Psychology. New and inexperienced Trend followers often get caught up in their emotions of fear, greed, hope and panic. It is impossible to be a successful for any period of time when these emotions take over. Inexperienced commodity traders with these uncontrolled emotions change their strategies consistently. This is a sure way to lose your money.
A successful trend follower believes in the long run that he will be a winner because he has an edge, controls his risk, and will execute his futures trading strategy accordingly to his EXACT PLAN. He thinks about his trading as a business. He knows that any one trade means nothing. He knows that this is a risk business. He knows that any month or for that fact any year means absolutely nothing. He knows Trend following is a life time strategy unlike any other investment strategy. Trend Following gives him liquidity and transparency unlike any other strategy. He knows that he does not know the future. He knows that he does not need to know the future to be successful over time.
A successful trend follower controls his risk. When a trade is not working, he simply gets out of his position and waits for another signal. No emotions…No fear. By executing his exact plan he avoids large losses which are devastating both financially and mentally.
Even when a trend follower is in a winning trade he will follow his trading strategy and exit when signaled. He believes in himself and in his plan and will not give in to the psychological pressure to exit the trade prematurely. Cotton for example has made a tremendous move and an inexperienced trend follower might exit. I learned this lesson with silver in the late 1970s. Commodities can go to extremes that are virtually unimaginable ( Silver went to approx $50). Fortunes were made just by being patient.
Too many want to be trend followers look for a magic system or holy grail. They need to master themselves first and then simply utilize a robust system that trades all markets the same with a heavy dose of risk management. If a trend follower can master these issues…over time the odds are on his side. The possibility of compounding his way to wealth are possible.
Futures trading involves risk. People can and do lose money