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Cool and Profitable

While risking capital on a trade, it's hard to not feel a little cautious. After all, if this trade, the next trade, and the one after that are losers, you'll begin wondering about what you might be doing wrong. You might feel a bit desperate, and think of trying to regain your edge.

Feeling uneasy after a series of losses is understandable. But experienced traders keep cool, even when they are in a drawdown. They aren't riddled with self-doubt. They don't question their trading strategy. They just wait for the market to move in their favor, put on the trade, and exit. It's effortless, almost easy. But if you're an inexperienced trader, cultivating a carefree mindset isn't as simple as it sounds.

At first glance, it seems easy to follow the advice of master traders on how to trade carefree: Make small trades that have minimal consequences to your account balance should you lose. Objectify the trade. Pretend it doesn't matter, and force yourself to think of the big picture. Think optimistically: "I'll make enough trades to see a profit. I'll just keep my chin up, chalk up losses to misfortune, and keep trading. Eventually I'll see a profit." However, many wannabe traders have trouble staying optimistic.

You don't accumulate enough trading capital to trade full time by taking unnecessary risks, and to the novice trader, trading can take on the aura of throwing away hard-earned money with little reason. It can be difficult to just forget about the money.

Most of us live in a rule-driven society. At work especially, we live by following conditional statements: If I do job task X, Y, and Z, then I'll get a reward. The more effort I put in, and the harder I work, the greater the rewards become.

It's like an assembly line approach to work: I'll bolt on my required number of wheels a day, and thereby earn my daily wage.

Making more money is a matter of willpower. If you can force yourself to work longer hours, you'll make more money. Such a strategy often works in white-collar jobs as well as blue-collar jobs, and it is natural to assume that merely following if then reward contingencies in trading leads to sure profits. It's tempting to think that if you just spend more time mulling over a trade, thinking long and hard enough, you'll account for every possibility. Similarly, if you search over and over again, you'll find the ultimate trading opportunity. It makes sense, but in reality it doesn't work that way.

Seasoned traders report that they make the most profits when they aren't expecting them. They observe the markets openly and freely, and suddenly they make a profitable trade. If you put pressure on yourself, however, you usually choke. Your mind isn't free, but cluttered with feelings of doubt and pressures to succeed. The frustration distracts you, and suddenly you find it almost impossible to make enough winning trades to come out ahead.

It's much more important to cultivate a carefree mindset. Don't put pressure on yourself, and don't think about the money. Many profitable traders don't focus on the money. In some ways, they have a disregard for money. To the professional, seasoned trader, the money is just a way to keep score. It isn't an end in itself. To the experienced trader, trading is a contest. You enter the contest, and if you rise to meet the challenge, you score more points. In this case, the points are represented in terms of money, but they are just points.

Winning traders focus on the enjoyment they derive from trading. This approach to trading allows them to think clearly and freely. By cultivating a carefree attitude, they remain cool and profitable.

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Tuesday, 25 June 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.