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Ready to Lose

Imagine what you would do in the following scenario. You have been looking at a position for a week. You had a clear and simple trading plan: Just wait for an announcement at the end of the week, watch prices jump, and then sell. As might be expected, things aren't working as you had planned. First, no clear trend has emerged; prices are moving chaotically up and down. Second, it's been two days since the announcement and the price has barely moved. You decide to wait for two days to see if your original plan will come to fruition, but a small voice inside you is telling you to sell. You've been stressed out and you're tired. It's been a tough week. Part of you wants to listen to the little voice, and just close out the position, but the logical part of your mind is telling you to wait patiently and see what happens. Although you know what you want to do, you have a powerful urge to sabotage your efforts, and just walk away. What can you do to combat this feeling?

Trading often comes down to maintaining a peak performance state at a few critical moments of trading. To take advantage of these key moments, you must be relaxed, full of energy, and ready to take decisive action. But your mind can grow weary, just like how a muscle can become weak and ready to fail at the slightest strain. When you go on a long run, for example, you soon run out of energy. You can't go any farther. Your muscles begin to ache and you need to take a rest and recuperate before you start moving again. It's the same when it comes to trying to maintain your mental edge. It's vital that you consider that the mind has limited energy, and that after putting in a hard and tedious effort, you must take a rest and rejuvenate, so you can face the market action with a renewed sense of vigor. If you have strained your mental "muscles," you'll have trouble maintaining control. Your mind will be elsewhere or you'll be too tired to act decisively. When you're tired, you may want to give up.

Don't underestimate your need for psychological energy. When you are tired, you will have a strong urge to give up at a critical point during a trade when you should enthusiastically watch the market action and be ready to face a challenge with a peak mental state. The winning trader is always ready and willing to take action. To be a winning trader, you must be rested and ready, so get plenty of rest, make sure you are well nourished and physically up to the stresses and strains of trading. By taking these precautions, you'll trade the markets with a winning mental edge and easily fight the urge to sabotage your efforts.

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Saturday, 22 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.