Futures trading psychology and probability: Don’t be your own worst enemy

Trading psychology and probability are two highly impactful aspects for futures traders to master. In a recent webinar titled, “Practical Trading Mind Methods,” International Day Trading Academy (IDTA) Founder and Director Cameron Buchanan outlined several takeaways for futures traders, like you, to consider. He noted who your potential worst enemy could be: yourself.

When it comes to trading psychology and probability, futures traders should know that:

• Human tendencies impact trading and managing those tendencies can prove difficult because you may not even know they exist. Any two traders with identical strategies can have vastly different experiences and outcomes.
• Traders can understand and practice analysis but still struggle with emotional trading.

“What I find from a lot of traders is the expectation that when they enter the market, they will win on every trade—that it’s bad to lose,” Buchanan said. For these traders, winning is the only acceptable outcome.

However, always winning in futures trading is not a realistic expectation. No matter how informed and what their business plan, futures traders must accept that losses are a part of doing business. There is a difference between taking a “good loss” and a “bad loss.” “If you followed your plan, managed your risk well, and still lost, then that’s a good loss and you should still be happy with yourself,” Buchanan added.

“Winning and losing [in futures trading] should be treated equally,” Buchanan said. Despite the emotional response being different for both, trading boils down to money management and risk management.

Futures trading psychology: When you can be your own worst enemy

Buchanan and IDTA caution futures traders that from a psychology and probability standpoint, you can be your own worst enemy. To avoid this:

• Learn from your past mistakes. Don’t make the same mistake twice.
• If you exit a trade too early in a move, adjust your exit criteria by looking at a longer time frame or using a different indicator.
• Still losing with a solid trading plan? Look in the mirror. You may be guilty of holding yourself back from trading success.

To learn more about Buchanan and IDTA’s trading psychology philosophies, view “Practical Trading Mind Methods,” here.

Interested in more futures trading tips? Explore the Ecosystem’s on-demand video education library, with new events added weekly. Check out our schedule of upcoming webinars and register to attend live events.