4 Key Questions to Gauge Your Trading Success

The attitude of the individual trader (part of the important aspect of trading psychology) plays a huge role in success (or failure) in futures trading. For a trader to become successful, he or she must enjoy the "process" of futures trading.

I have a few questions below that will help determine whether you are a good candidate to become a successful trader--if you don't feel you already fit into that category.

Before I get to the questions, it's important to touch upon the term "trading success." What is trading success? Many would reply that trading success is defined as being profitable at trading-­making more money at futures trading than one loses. I cannot disagree with that definition, but there is more to trading success than just the amount of profits accrued from trading. To better explain, here are examples of two hypothetical traders:

1. Trader Bob just started trading this year and has racked up $50,000 in futures trading profits. But he's not happy with that figure. He wants more. Bob wants to "bring the markets to their knees"--and quickly. Bob does not at all enjoy studying charts or reading and learning about fundamental factors that impact markets. His trading decisions are based mostly upon "tips" from friends or his broker. Soon, Trader Bob says he will begin establishing larger trading positions to accrue even bigger and faster profits.
2. Trader Mary has read many books and attended trading seminars--and "paper traded" before she began putting "real money" on the trading table. She, too, has been trading for around one year, and has accrued about $2,000 in profits. She enjoys studying charts, reading about market fundamentals and continues to read books on how successful traders became successful. Trader Mary enjoys the interaction she has with other traders with whom she has become acquainted. She does not get overly excited about winning trades or overly discouraged about losing trades. Trader Mary knows she's "in it for the longer haul" and figures that if she works hard, uses sound money management and "loses her ego," then hopefully good things will come from trading futures.

One can argue that both Trader Bob and Trader Mary have been successful futures traders. But which trader would you say has been most successful? Which trader would you say will continue to be successful? Most would agree that Trader Mary is achieving the greater degree of success in futures trading--even though she does not have nearly as much trading profits as Trader Bob. No doubt, Trader Bob has seen a very good run of trading profits. However, he appears to be a "flash in the pan" and is very likely doomed to "flame out."

One more analogy before I get to the questions that may help determine if you are, or will be, a successful trader. (I think my friend and respected fellow trader and educator Joe DiNapoli would agree with this analogy, as Joe restores classic cars, too.) Trading futures is like rebuilding and restoring a classic automobile. There are several tasks (many of them tedious) on the road to completing the restoration. Those restorers who do not enjoy the tasks of restoring likely will not continue to restore, and will not have a good finished product. Those restorers who take their time and enjoy the entire process of restoring an automobile will have a very fine finished product. The same is true with trading.

Now, here are a few questions to help determine if you are, or will be, a successful futures trader:

1. Do enjoy the entire process of trading futures--from studying charts, reading about and learning fundamentals, listening to and learning from mentors, and even figuring out what mistakes you have made in previous trades, and how you will improve from those previous mistakes? (Remember, a trader never stops learning and should never stop seeking knowledge about markets and trading.)
2. If you are a beginning trader with less than a couple years experience, are you willing to use the very sound money management principles required for survival in futures trading--even if it means meager profits (or meager losses) the first year or two?
3. Do you have the "patience" to wait for good trading opportunities to develop, and then have the "discipline" to follow your trading plan once you make the trade?
4. Are you the type of person who CAN stand to lose, and can you accept that trading losses are your own fault? (This is a very important question, because the typical futures trader has a more competitive personality. Remember that even the most successful traders have losing trades--and sometimes several in a row.)

If you have answered "yes," to these questions, then your road to trading success will be less rocky. If you answered "no" to any of the above questions, then you face a more difficult task on the road to trading success, and you need to figure out what changes you should make to make the "process of trading" more rewarding.

Vitamins for Your Soul, Part VIII

If you've been practicing our vitamins for your soul tips, you've probably seen some major changes occurring in your life. Most of the change may be non-trading related, but overall, I believe they'll help you immensely as a trader because they'll help you lighten up.

Our last six vitamins have included:

1. Focus on the Moment;
2. Make Yourself Laugh;
3. If Something Bothers You, Give It To God;
4. Give Thanks Every Day for your Blessings;
5. Follow Your Bliss;
6. Commit to Love; and
7. Meditate and Listen

This week my I'm adding a difficult, but very beneficial one called fasting.

Fasting

I once did a 57 day fast. It started with three meals a day of just fresh fruit and vegetables. In between the meals, I took shakes with lots of fiber and barium to coat my system. In addition, I was taking special nutritional supplements.

When my system felt like it could tolerate it, I reduced by one meal and just substituted a shake. I continued this process until I was only doing the shakes, plus lots of water. The total experience was 57 days and the last 10 days involved no meals. I lost 33 lbs (which I gained back quickly) but by the end of the fast I had an amazing amount of energy. I felt clean and better than I've felt in a long time. However, I'm not recommended anything that strenuous.

Fasting is actually your body's way of cleansing itself. When you think about humans living with nature, they had to deal with the seasons. During the growing season there was plenty of food, but in the winter months there was nothing. People could only eat what they had managed to preserve and save from the growing season. So naturally there was probably a lot of fasting.

When you were fasting, the body would feed off of itself and it would eat those portions of the body that were the least useful - things that are actually harmful to the body. Today, of course, there is no need to ever fast. We have refrigeration and lots of preservatives, so there is always food - even in the depths of winter. However, much of that food is not very good for us. It contains food elements that have been refined out of much of the nutritional value (i.e., wheat) or preservatives which are designed to keep other things from eating your food (and thus are not good for you either) or chemicals. For example, the most nutritious food in nature was either sweet or salty. Those tastes basically meant that the food was full of essential minerals and vitamins. We crave those foods. However, modern man has figured out how to artificially produce those flavors (i.e. sugar and sugar substitutes) and has created massive addictions as a result. Sugar is not that different chemically from alcohol.

If you decided to try this vitamin for your soul, it probably will not be that pleasant. Within a day, you'll probably get either withdrawal reactions or side effects from some of the poisons that are already in your system. However, I'm not suggesting anything drastic. Just spend one day drinking lots of fresh water and fruit juice with no food. Notice your experience when you do that. Or, instead, spend three days on a fresh fruit and vegetable fast. Notice your experience then. This one is another exercise in self-discovery.

Vitamins for Your Soul, Part VI

If you've been "taking your vitamins" for your soul, since I started these tips, you've probably noticed some lightening and some expansion in yourself. And lightening up as a trader will help you immensely. So far your recommended vitamins have included:

1. Focus on the Moment;
2. Make Yourself Laugh;
3. If Something Bothers You, Give It To God;
4. Give Thanks Every Day for your Blessings; and
5. Follow Your Bliss

This week we will add another interesting tip, Commit to Love.

Commit to Love

Two months ago, I attended a self-improvement workshop given by someone that I considered to be very loving. Most of the workshop involved people bringing up problems and he would very lovingly help them release the problem. That was great, but I noticed that certain people would bring the same problem up over and over and over again. In fact, one person, who might be described as a "starving actor," had been to over ten of these workshops and he was still bringing up trivial stuff – almost as if he'd accomplished nothing. Nevertheless, the workshop guru laughed with him and gently took him through a release of his problem.

My initial thought was "how can he not react to that person bringing up the same stuff over and over again." In fact, I'm sure he got the workshop for free for being an assistant, but that means he's probably brought up the same stuff over and over again at each workshop. And again I thought, "how can he not react to this person's lack of progress?" And then he told me the secret. The secret was to love the person as he was. This means that he has no emotional investment on whether or not the person makes a change. He just loves him, which means he can respond lovingly, no matter what happens. And when I understood that, I really began to understand what unconditional love really means.

So this week's tip is all about being loving. That means loving everything exactly as it is without any judgment.

Most of our decisions are made from fear and worry. I can remember numerous times in the past when I might have noticed that a future workshop we were doing had a very low enrollment. My natural tendency would be to start to worry about that. What if no more people enroll? What if there is not enough enrollments to pay for speakers fees much less the hotel? But what if we cancel? Then we have a bad reputation with the hotel because they cannot rely on us. We also lose all the marketing money we've already spent on the workshop. I could go on and on with that kind of dialogue and worry. When I do that, I'm operating out of fear and that's not useful. Instead, I elect to operate from love.

One way to operate out of love is to declare who you are. For example, you might make a declaration that says: "I'm a loving, kind, compassionate man." Write it out! Memorize it and declare it to yourself so that it becomes second nature to you. And, when you make decisions, you then begin to say, "What does a loving, kind, compassionate man do in this situation?" He certainly doesn't make decisions based upon fear. Instead, he makes decisions based upon love and compassion. And, of course, the first thing that pops into my mind when I say that is "How can I handle this situation so that everyone wins?" What more can I give to increase enrollment in this workshop? How can I add more value to this workshop so that more people can attend? And, of course, those responses get a much different response than saying to yourself, "We're going to lose a lot of money here even if I cancel the workshop."

So here's your next assignment: Start doing what you love to do. Notice what you love to do and what you dislike doing and move toward doing what you love. Even if it seems scary, try selecting what you love to do. And when you do that, notice the results you get.

Secondly, decide who you are and make a commitment statement that reflects who you are. That statement might go something like: "I'm a powerful, generous, kind leader!" Or, "I'm a courageous, loving, compassionate woman." Write down whatever you think might fit you. Put it on a sheet of paper and memorize it. And when you make decisions read your personal declaration and act as if it were true. Once you've done that, then make your decision. If you do, you'll probably find that your results are much different in all aspects of your life.

Vitamins for Your Soul, Part V

If you've been "taking your vitamins" for your soul, since I started these tips, you've probably noticed some lightening and some expansion in yourself. And lightening up as a trader will help you immensely. So far your recommended vitamins have included:

1. Focus on the Moment;
2. Make Yourself Laugh;
3. If Something Bothers You, Give It To God; and
4. Give Thanks Every Day for your Blessings.

This week we will add one of my favorites, Follow Your Bliss.

Follow Your Bliss

When I first went through A Course In Miracles, I made a commitment to follow my bliss. Joseph Campbell stated in his remarkable series The Power of Myth that following your bliss is essentially following God's path. And that seemed great to me: do what gives me joy, and my life would work better.

In 1986, I made a commitment to quit my part-time job. I was working one day a week on a job I hated, but that job was a security blanket. As long as I was part-time, I had medical benefits and the possibility of becoming full-time again. I quit the job and got rid of the security blanket. Two weeks later my wife unexpectedly lost her job and was not re-employed for about nine months. However, I made it through that year without even having to borrow much money.

By 1987 my own business was progressing. I decided that I needed to hire a secretary to keep up with the workload. However, I hadn't made that much money the prior year and a secretary's salary would take up most of that. Nevertheless, I took the plunge—another sign of commitment—and that year was the first year that I made a six-figure salary. My business really seemed to take off from there.

In each case, the decisions were difficult. I was giving up security and the status quo for something unknown. Even though I hated the known and loved what I was going into, it was very scary.

Along the way, through following this guidance of where joy seemed to be, I moved away from almost every attachment I had at the time—which included my marriage. It just wasn't working and we couldn't seem to fix it. Much of this was very scary, even though I was moving toward more joy. In the end, the results have been wonderful. It's a big step, but following your bliss is a very important vitamin for your soul.

What do you love to do? That's probably a sign that you should be doing more of that. What do you hate to do? That's probably a sign that you should be doing less of that. At one point, when my business was already quite successful, I made a note of all of the things I hated to do and all of the things I loved to do. Guess what? All of the things I loved to do were the things that probably made the most money for the business. They revolved around helping people, doing creative things, doing my workshop, developing new products, and trading. Those were all things that made money.

What I hated were the day to day routine of managing the business and all of the details I had to put up with by doing that. While I still have some of those tasks, I elected to find other people who do a much better job of doing those things than I could ever do. And now I totally concentrate on the things I love to do.

So this week's assignment is to make a list of what you love to do and what you dislike. If you love it, then decide how you can do more of it. If you dislike it, then determine how you can turn it over to someone else. You'll probably find that this simple act makes a tremendous difference in your life.

Trading Your Account is Like Running a Business

There has been much said about the psychology of trading and the necessity that we manage our emotions with every gain and loss. Emotions tend to rise to the surface during times of uncertainly as we are faced with an unexpected situation or crisis. How would we feel to win the state lottery worth over $10 million? It is easy to say, we would feel very surprised and in fact ecstatic. On the other hand, how would the average person feel to lose their life savings in an investment of some type? Most would assume he/she would feel pretty horrible. These emotions should not come into play as we trade our accounts. Speculating in the financial markets should be approached with the same planning, research, and discipline in its execution, as a small business owner spends each day making decisions in order to improve revenues, and reduce risk. It would be absurd for a business owner to fall into panic during the first or second slow day of sales. We would logically expect that entrepreneur to simply review the mission statement and ensure each one of his/her actions has this mission statement and long term business plan in mind.

Let's assume we are not trading the FX-market, but rather our business is one of a traveling salesman, who travels the world, marketing their various products to potential consumers in various marketplaces. It is safe to say that one product may reap higher profits in certain markets and regions than others. No one would be surprised to learn that snow tires may not sell extremely well in Mojave Desert, just as a sun-tan franchise may not be able to sustain itself in northern Canada. So as traveling salesman, we should quickly realize certain goods and services should be marketed to certain marketplaces and spared from others.

Just as our planet acts as the home of many different marketplaces, each specific currency pair also offers us an active and liquid market that may reward certain trading styles and not others. In other words, as traders, our basket of goods and services are nothing more than our individual trading strategies. Let's take a look at the GBPJPY pair. Over the past few years, the BOE (Bank of England) has maintained a quite aggressive interest rate policy as rates have continued to soar due to a strong underlying economy and housing market. During the same period of time, the BOJ (Bank of Japan) has maintained a strict zero interest rate policy, only finally raising rates in the summer of 2006' after nearly a 6-year drought of zero interest rates across the land. This obvious inequality has led countless traders, hedge funds, and financial institutions alike to sell short the JPY in order to fund purchases of higher yielding currencies such as the GBP, AUD, NZD, & USD. For that reason, the chart has developed a long-term trend to the upside, as buyers have continued to win the battle against sellers over the past few years.

Taking all this into consideration, a lucrative trading strategy would have been to 'buy new highs' as this would surely put the wind (or a strong up trending market) in our sails. To summarize: When trading a pair with an obvious bias to one side of the 'carry' (interest rate differential), we should focus our attention to that direction of the carry, and with a breakout approach in mind. The marketplace is the GBPJPY currency pair, and our basket of goods and services is our breakout trading strategies. Finally, logic dictates that if we hope to drum up the most amount of business, those transactions should be done during the markets active hours; namely the GBP & JPY active market hours.

Following this analogy let's travel now to a different market environment in which both components of the currency pair are quite similar in make up. Both the GBP and CHF currencies are derived from economies of a similar background. If the European economy performs well, it is very plausible that both the UK and Swiss economies will benefit to a similar degree. When the European economy falls into economic and / or political turmoil, thus both the GBP and CHF currencies may fall under similar selling pressure. For this reason the GBPCHF currency pair tends to establish very consistent trading ranges that may persist one or many years at a time. As neither currency is expected to breakout of this relative trading range, the long-term charts have provided range bound players with a fantastic opportunity to assume simply; nothing different will happen.

In extreme range bound conditions, traders may opt to simply take a very straight forward 'buy low, sell high' approach. With conservative limits and relatively wide stops, it is not difficult to attain a high % of winning trades over a period of time, as the market spends an enormous amount of time oscillating within recent high and low ranges. In this case, the marketplace being the GBPCHF pair, our most lucrative process of generating revenues may be to simply play the range.

Looking back to see if we we're right. Every so often, it is important that we look back to our success rate in generating profits, and identify those practices that made money, and those that did not. Did our breakout bias make money in the GBPJPY environment? Did this trading style produce profits in any other markets as well? On the same note, did our range bound mentality prove to be successful in the more dormant GBPCHF pair? We should also identify why or why not did this occur. Assuming a consistent application of these strategies, our trading records can provide a very accurate gauge of the strength or lack there of, of each strategy, and its respective performance in each trading environment (currency pair).

If we can identify what trading techniques tend to produce the most consistent and profitable results within a specific currency pair and under strict money management supervision, then the day to day gains and losses will not grip our emotions but will rather place our trading equity at risk, only under the most favorable market and trading conditions, and with the highest probabilities of success placed in our favor.

Vitamins for Your Soul, Part IV

Give Thanks For Your Blessings

I've been practicing taking my vitamins for a while, and I'm noticing a lightening and expansion in myself. I think it is wonderful and I thoroughly encourage you to follow these ideas yourself.

For example, I went with my wife to a place of great beauty. We spent a lot of time hiking, meditating, and being with nature during the week. My concerns seemed to melt away as a result. It was probably the most relaxing vacation I've had in a long time despite some "apparent" external pressures that were bothering me a lot before I left. Yet, miraculously, I didn't even think about them while I was on this trip. Consequently, I want to give you several more "vitamins for your soul" this week

Our first two vitamins have included 1) Focusing on the Moment , 2) Making Yourself Laugh, and 3) Giving it to God. This week, we'll continue with our fourth vitamin, giving thanks for your blessings.

Give Thanks For Your Blessings

A great book that I recommend is called Marriage of Spirit1. It's a whole program to help you lighten yourself. And part of that program is to keep a daily journal. When I did the program, I'd write down all of the issues and emotional turmoil that I seemed to be going through that day. When I finished writing, I then did exercises to clear out the turmoil.

What was interesting to me was noticing how much turmoil I could write down in that journal. The exercises seemed to work, but there was always something to write down. And this really surprised me since I've done hundreds of hours of personal clearing work over the years, so I would expect to be pretty clear by now.

However, I remember an old adage that goes "you are what you think about." I'm very strongly in favor of personal clearing because most people have major scars on their souls that they need to heal. However, I've cleared just about all of them as far as I know. And I was still coming up with stuff.

However, then it began to dawn on me how much time I was spending in my life looking for things to clear. When you look, you always find something. As a result, I changed my focus to giving thanks each day. Instead of looking for issues, I spent the same amount of time writing down the blessings in my life and giving thanks for those blessings. Quite often the blessings are the same, but that's okay because I'm still thankful for them.

However, I find the process of writing down my blessings and giving thanks changes my focus entirely from the old process of finding my issues. What's occurred is a gradual lightening of my spirit. Again, this is a wonderful vitamin. Try it yourself.

So here's your assignment: Get yourself a journal and each day write down five blessings you've experienced for which you are very grateful. In addition, if you find yourself worrying about anything or fearful about anything, then write that down on a piece of paper and give it to God. Put it in your own God box. But remember that you have to be totally willing to turn it over to God and release it. If you don't give it willingly, you'll find that God is quite willing to let you keep it.

Vitamins for Your Soul, Part III

Our first two vitamins have included 1) Focusing on the Moment and 2) Making Yourself Laugh. Both of these involved doing things that cause you to lighten up. This week we'll change directions slightly and focus on some vitamins that help you discover who you are. This month I'd like to suggest a third vitamin that if something bothers you, give it to God;

Give It to God

About five years ago an event happened in my life that was so traumatic, it changed a number of my values. It also caused me to worry a great deal - mostly over nothing - and spend a great deal of time feeling sorry for myself. Essentially, a lot of change happened in my life, mostly from my own internal creations, and I then hated how my life was different and became very concerned about it.

Ironically, I spent four years going through A Course In Miracles, and learned that much of what we think of as reality is an illusion. I understood that what I created was an illusion and that I created it. Nevertheless, I worried about it constantly, even though nothing happened. My values changed and I stopped doing certain things that I used to do; yet nothing changed but the creation of new illusions.

While much of what I've said in the prior two paragraphs may not make sense to you…perhaps it will when I give you the solution, the vitamin for the soul. My solution was to make a God Box. We keep this box in a special place in the house. And whenever something seems to really bother me, I do the following:

• First, I notice that I am spending a great deal of time in illusion and that it is not food for my soul.
• Once I've noticed the impact that this item has upon my life, I take a small piece of paper and write it down.
• As I write down what's bothering me, I give it to God.
• In addition, I also give thanks to God knowing that He will take it from me.
• I then put the piece of paper in my God Box and forget about it.

I've noticed that an amazing thing happens when you follow this exercise. A problem that once dominated my thinking suddenly disappears. And if it doesn't, then the problem usually changes in some way and I then give the new problem to God in the same way. And to date, I've never had the same problem recur after I've offered it twice.

• First, I notice that I am spending a great deal of time in illusion and that it is not food for my soul.
• Once I've noticed the impact that this item has upon my life, I take a small piece of paper and write it down.
• As I write down what's bothering me, I give it to God.
• In addition, I also give thanks to God knowing that He will take it from me.
• I then put the piece of paper in my God Box and forget about it.

I've noticed that an amazing thing happens when you follow this exercise. A problem that once dominated my thinking suddenly disappears. And if it doesn't, then the problem usually changes in some way and I then give the new problem to God in the same way. And to date, I've never had the same problem recur after I've offered it twice.

Occasionally, I might have a thought about the problem, but then I realize, "You just gave this to God. Are you now taking it back?" The answer is usually "No," and I automatically just drop it.

There is an interesting statement in A Course In Miracles that says something like, "Everything is in God's control unless you have fear about it. When you have fear, you are taking control away from God and trying to control the situation yourself through your own creations." Perhaps this explains why the God Box works so well. Anyway, I strongly recommend this important vitamin for your soul. It works very well.

So your assignment for the week, as your third vitamin, is to practice this exercise for the week for everything that bothers you. Even if you find yourself with some little irritation, just write it down on a piece of paper, and put it in your God box and forget about it.