If all of us were robots and traded without regard for past failures or successes, there would certainly be a lot more successful traders in this world. Indeed, emotions play a critical role in causing traders to lose in the commodity futures market. Emotions are the reason why some traders take profit too early, risk too much in a trade, or fail to follow their own rules. In fact, emotions are reflected in the demand and supply of the market, depicted graphically in charts.

 

Thus, the key to successful trading commodity futures is merely to control our emotions and not let it cloud our judgment. The question now is: How do we control our emotions in trading? How do we train ourselves not to let emotions get in the way when we trade? How do we make sure that we follow our own rules no matter what?

 

According the Dr. Van K. Tharp, a psychologist who has been studying trader psychology, there are two major models of a successful trader. The first would be the intuitive trader, and the other would be the mechanical trader. Typically, both traders would have the following beliefs: Money is unimportant; it is fine to lose; trading is like playing a game; mental rehearsal is crucial before trading and a belief that they have already won before they have even placed a trade. The mechanical trader makes complex calculations of market data until a pattern befitting his model is found. On the other hand, the intuitive trader utilizes his feelings to anticipate market movement and ends up making quicker decisions than the mechanical trader.

 

As a successful commodity futures trader, Bruce Kovner attributes his ability to stay rational and disciplined as one of two reasons for his success. This helps him make better decisions and not to succumb to pressure when trading in a volatile market. Apart from that, being rational also helps him take positions that may seem unjustified to other traders. This means that he is able to see entry and exit opportunities that others can’t, a talent that has helped him make money in the market.

 

Another successful commodities trader, Richard Dennis, believes that traders should be as emotional as possible when placing trades. With this, traders will not mull over short term losses, but rather focus on their long term goals. This way, they waste no time in moving forward and planning their next trades. In addition, Bruce believes that mulling over pass losses actually weakens a trader’s confidence, affecting future trades in the process.

 

In conclusion, our emotions should not be allowed to cloud our judgment when it comes to commodity futures trading. With this realization, traders should instead try their best to focus on the mechanics of a trade and make their decisions based on the facts and figures they have. By detaching themselves from the past, traders are able to sustain their optimism and confidence, while gaining trading success in the process.