Learn to Trade with Confidence

It’s an all too common occurrence. A trader has used his trade selection process to pick a seemingly profitable futures contract. Using his favorite analysis methods and indicators he has narrowed his search from a group of possibilities to a worthy candidate. A trading plan has been developed, specifying entry and exit points along with profit and loss objectives. All seems ready to go. Then, he begins reading the daily market reports and trading recommendations regarding his chosen commodity that have been written by supposed experts. Many of them make predictions that are very different from his own. The trader now begins to second guess himself and vacillation sets in. What is he to do? How can he take a position that is opposite from what the experts recommend?

View expert opinions with a grain of salt

This sort of thing occurs in the minds of thousands of traders every day. Those that fall prey to it often take no action and miss out on profitable opportunities. Still others, who lack faith in their own abilities, will alter their trading decision and follow the advice of market “gurus” and “experts”, often to their disappointment. The successful trader needs to develop confidence in his own ability to analyze the market and choose viable trades. Confidence is the key word here. It is an unmistakable attribute of all successful futures traders. One must learn to silence much of the incessant chatter about the market that goes on every day. If you don’t, it will lead to inaction or incorrect action most of the time.

Now, I don’t suggest you simply ignore the market commentary of others. It is alright to take other opinions into account. At least for the reason that they can make you reassess and go over your trading plan to make sure you haven’t made any blatant errors in judgment. My advice is to ‘listen’ to a few chosen voices, but don’t let them ‘dictate’ how you will act. One must remember that many of the opinions of “experts” are often proven to be wrong. In addition, many of those who write market commentary and make recommendations do so for a wide array of commodities on a daily basis. This is an overwhelming task and it is often the case that they have not delved into the particulars of your chosen commodity as deeply as you have. Typically, they rely on a couple of indicators to make their judgments. These indicators may not be the same that you use, nor may their assessment be based on a level or risk that is acceptable to you. In short, their criteria for judging trades is often vastly different than your own. This is especially important to remember if your basket of tools used in forming a trading plan has given you good results in the past.

Learn to trust yourself

Trust your plan and trust your powers of judgment. Furthermore, keep this sense of confidence in yourself throughout the duration of your position in the market. Loosing confidence in yourself and your trading plan while holding a market position most often results in losses. If doubt is haunting you and you cannot control, it is best to simply offset your position and be clear of the market. Reversing or altering your trading plan in mid-trade is the last thing you should do.

The most important thing to remember about trading with confidence is this: No matter how diligent or thorough your research into a particular trade, you may still end up wrong about the direction of the market. This is true for everyone, nobody is right every time. You might be wrong this time, but your trading plan (with clearly defined loss thresholds) will save you. So, in the final analysis, it isn’t always being right about the direction of the market that will make you a success. Instead, it is having the discipline to stick to your trading plan that will.

Coping with Drawdowns in Futures Trading