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30 Years of Trading Wisdom - Part 1

07/09/01 10:07:37 AM
by Terry Zis

Having been involved in the futures markets for the past 30 years it has never really been obvious to me why some people win and some people lose. But in giving it some more thought, I've made the following deductions.

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The first conclusion I've come to is that the difference between people who lose and people who win consistently in the futures markets is character. Having the character to win, and most importantly having the character to stick with a trading game plan. A key component of character is personality, which plays a big role in the overall success of a person's trading. The art of trading is such that it has the effect of bringing out everyone's good and bad traits.

For example, a gentleman gets into an argument with his wife and gets angry. If this gentleman lacks the necessary discipline and lets the anger spill into his trading, he might stray from his game plan and compromise himself purely out of anger. This is totally unacceptable because he will not only trade poorly that day, but he will trade poorly the next day as well while trying to recoup his losses from the day before.

Secondly, there are many different ways to be successful in the futures markets. For me it was daytrading. For others it's spreading, trading options, or position trading. But it all boils down to one thing-- discipline. The reason some people succeed in the markets while others fail is because some go in with a definite trading plan. They certainly have the edge. They know when to go in, how big to go, when to get out, and when they are wrong.

There is also the myth that you can make or lose all your money in one day. Trading futures is a business; it is not a hobby, even if it is a sideline for some people. Trading is not gambling. It is not like going to the horse races or casino. It is certainly not for the faint of heart. A person must have the intestinal fortitude to absorb losses and to capitalize on profits.

In addition, a person must know himself as well as he knows the markets, if not more so. All the books, all the trading systems, and any other type of methodology they employ to will not work if they don't know themselves. When you get down to it, you're the one who makes the trade and you're the one ultimately responsible for that trade's outcome. Thus, it is of the utmost importance that you understand your strengths and weaknesses, and make the appropriate adjustments in accordance with your trading game plan.

Remember that one of a trader's best friends is the historical price chart of their chosen trading commodity. For example, if someone could tell you how many pigs there were on each farm so that you could determine where pork bellies or hogs would go, that information would be secondary to what a chart could tell you about price movement. Charts are a replication of the emotions of people, and history repeats itself. Certain charts patterns that keeping popping up are an example of this. Markets normally overprice and underprice themselves and a good market technician can pick up on that.

Knowing a farm's pig population is a great tool but that doesn't mean that people will be willing to accelerate or decelerate the price based on that number. Futures markets move in advance of the fundamentals (the exact number of pigs). In other words, because of historical foundations, charts can more accurately predict how the fundamentals will be absorbed into the actual price of the futures contract.

One last piece of information is the importance of volatility. If there is no volatility the market will find a way to take a trader's money. I had a successful associate that equated the market to a bucking bronco, meaning that the market always tries to get you off so that wherever you place your stop the market will find you.

Customers typically get very paranoid about using stops, feeling that market or local traders are gunning for their stops. Nothing could be further from the truth. The market is going to go where it's going to go and I don't think that any trader should flatter themselves into thinking that the market is purposely capitalizing on their error in judgment. The market doesn't care about one individual trader and quickly forgets who buys and sells at any specific time.

There is a substantial risk of loss in trading futures and options

Terry Zis

Commodity Trading Advisor & Founder of the TZ Tracker

Title: Commodity Trading Advisor
Company: Alaron Trading
Address: 822 W. Washington
Chicago, IL 60607
Phone # for sales: 800-542-1022
Fax: 312-563-8588
E-mail address:

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