Futures traders are players and the game they play is fast paced. To succeed as a futures trader you must have self confidence, discipline, patience and quick reflexes. You need those quick reflexes to keep track of the many variables that affect the futures markets and, therefore, influence your buy/sell decisions. Among the more important variables you must track are:

• Underlying asset. A futures contract is based on an underlying asset. Most often assets are physical commodities. As we’ve discussed in recent posts, commodities are natural resources, so the underlying asset could be crude oil, soy beans, gold, sugar, etc. However, futures contract can be used to trade all sorts of assets, such as interest rates, indexes, currencies, equities, even the weather! Different commodities are traded on different exchanges. For example, the Intercontinental Exchange (ICE) trades crude oil, electricity and natural gas while the Chicago Board of Trade (CBOT) trades corn, ethanol, gold, oats, rice, silver, soybeans and wheat. Before you trade, be clear about the asset you want to trade and, particularly, about the exchange you want to trade on. Some assets are traded on more than one exchange. For example, wheat is traded on CBOT, the Kansas City Board of Trade (KCBT) and the Minneapolis Grain Exchange (MGE).
• Underlying quantity. The contract size, or trading unit, specifies the amount of the underlying asset covered by the contract. Futures contracts are highly standardized and specific to each exchange.  For ease of trading, the size of one futures contract is predetermined and fixed by each exchange. For example, one futures contract of frozen pork bellies traded on the CME equals 40,000 pounds of pork. One futures contract of light sweet crude oil on the NYMEX equals 1000 US barrels, or 42,000 gallons. Before you purchase a futures contract, make sure you know the exact amount of the underlying asset represented by the contract. Due to the influx of individual investors into the futures markets, many exchanges offer smaller sized contracts — minis. For example, one futures contract for light sweet crude oil traded on the NYMEX miNY is 500 barrels, half the quantity and, therefore, half the price of a traditional contract. For this very reason, I recommend trading the e-minis.

Next time, we’ll talk about more of the variables futures traders have to juggle as they make trading decisions.

Human physiology affects our ability to achieve the mental, physical and emotional control needed to succeed as a futures trader. Like primitive hunters, futures traders are competing in a hostile world that demands total concentration and lightening reflexes to survive. All the technology we use can make many of our tasks, like analysis and charting, easier and can increase our profitability as futures traders; but technology is just a tool. Ultimately, we must rely on our mind and our body to pull the trigger and make the trade.

The goal of the futures trader is to achieve the total synergy of mind and body called the Alpha Zone. You have entered the Alpha Zone when your mental, physical and emotional control is at its peak. When this happens you are trading “in the zone.”

While some traders utilize biofeedback techniques to help them learn to achieve this state, there are a number of common sense things you can do to get yourself in the zone.

• Listen to your biological clock. Humans are hard wired to hunt during the day and sleep at night. Over the centuries though the human clock has gotten shaken up a bit, so that today we don’t all reach our optimum operating peak at the same time of day. (We’ve all know people whose brains don’t seem to click on until noon, the “not a morning person” types.) Try to trade during the time of day when you know you’re at your best. You can help yourself by trading in a bright, well-lit area with, preferably, a fair amount of natural light. Light, particularly sunlight, makes us more alert.
• Tune up your body.  Trading is a sedentary occupation. Bodies at rest are easily fatigued. Jump-start your metabolism with an energizing walk or run early in the morning. During the day, relieve fatigue and stimulate your muscles with stretching or isometric exercises. Squeezing a small rubber ball helps some traders stay alert and focused.
•  Fuel your body. Don’t start your day with sugary foods. At first your blood sugar will spike and you’ll feel alert. But as your blood sugar drops during the day, you’ll feel increasingly fatigued and your performance will suffer. Some traders snack on energy bars mid-morning and afternoon to keep their bodies fueled. Make sure you check ingredients and avoid bars with high sugar contents. Sugary snacks will send you quickly careening from high alertness to dragging fatigue. Protein and complex carbohydrates will help you achieve and maintain alertness and concentration. However, beware of naturally sleep-inducing foods such as turkey, milk, bananas, fish and egg whites. Foods that can perk you up include coffee, tea, chocolate, soft drinks, and herbal teas. Be cautious about using caffeine to maintain alertness. It can send you on the same peak and valley ride as sugar, with increased caffeine needed to achieve the same level of alertness each time the previous dose wears off.
• Control your environment. Dry, cool air will help keep you alert and focused, as will bright light, particularly natural light. The smell of peppermint increases alertness. A spritz of mint in the air a couple of times between noon and 1 p.m. can help get you through the lunchtime doldrums. Dull, repetitive sounds like a computer or fluorescent light humming can be sleep-inducing. Sharp, irregular sounds like loud conversation or a radio can be distracting. A set of soft earplugs from your local drugstore can solve both problems, improving concentration.
• Recharge your batteries. Adequate sleep improves both performance and alertness. For your body to operate at peak efficiency, you must get enough sleep to enter the REM (rapid eye movement) cycle which promotes learning, creativity and imagination. This is also the most restful of the four sleep cycles and necessary to fully recharge your body’s battery.

• Cheapskate. Many people are foolishly cheap. They are so anxious to start trading on the futures markets that they ignore the necessity of first acquiring the proper education, tools and software to succeed. These people will lose more money in their first round of trades than they would have spent on the tools that would have allowed them to succeed. You can’t be “penny wise but pound foolish,” as my grandmother would say. Don’t nickel and dime your training budget. If you truly want to succeed as a futures trader, spend the money to learn from the best and acquire the best tools available. Click here to hear what my students have to say and learn more about my Futures Trading Secrets Course.
• Impatient. We lived in a society increasingly driven by instant gratification. We don’t want to wait for it or earn it; we want it now! Futures trading is a fast-paced, risk-filled environment that seems to attract people who like to live in the fast lane. These people are so blinded by the dream of instant wealth that they neglect their training, fail to take the time to develop a reliable system, refuse to stick with their system and, as a result, crash and burn. As grandmother would say, “You have to crawl before you walk and walk before you run.” If you want to succeed as a futures trader, slow down and take the time to learn the ropes and develop and practice your system.
• Greedy. Futures trading is not the way to get rich quick, though some seminar organizers use that as a marketing ploy to lure the unwary. Successful futures traders are not  gamblers. You cannot succeed by trading out of greed or desperation; or as my grandmother would say, “A fool and his money are soon parted.” Using emotion as a basis for trading is a quick path to failure. Success futures traders learn all they can, develop their system, work it and stick to it. Success as a futures trader comes from accumulated profits (often small at first), not one big score.
• Overconfident. If you want to succeed as a futures trader, park your ego at the door. Ego distorts rational thinking. The overconfident trader allows emotion to rule his actions. He is so certain that he is right that he will overstay a position to avoid admitting he was wrong. The market is fluid, ever changing. A futures trader must be fluid and able to change position to succeed. You will never be smarter than the market; the market will always win. As grandmother would say, “Pride goeth before the fall,” to which granddad would add, “Don’t bump your nose on the way down”

Making practice trades allows you to:

• Test and fine tune your trading system.
• Learn to successfully pull the trigger.
• Perfect your charting system.
• Develop productive trading habits.
• Practice self discipline.
• See if you have what it takes to be a futures trader.

That last item is very important. You can have the best system in the world but if you don’t believe in yourself, if you don’t believe in your system, if you don’t have the passion to trade, no system in the world will make you a successful futures trader. Like I tell my students, successful futures trading is 90% attitude. Not everyone has the skill, passion, ability or discipline to succeed. Better to find out before you lose your money.

In my Futures Trading Secrets course I recommend that students practice trading on the e-Mini with Sims Broker until they achieve a certain level of confidence and consistency in their trades. Log and study your profits and losses. Look for patterns that indicate when you successfully pulled the trigger and when you failed. Work to increase successful strategies and decrease unsuccessful ones.

Develop successful daily trading habits and routines. Practice the discipline to stick to them even when you don’t feel like it or they don’t seem to be working. Discipline and routine are essential habits of the successful futures trader. Every trader loses sometimes. You have to have the discipline to follow your routine and have faith in your system even when you’re losing if you are to ultimately succeed.

Practicing futures trading on paper is important before you attempt the real thing. Before you start trading with real money, you must develop the discipline to control your emotions and stick to your system. Plunking down cold, hard cash opens the door to greed and fear which can submarine even the best system if not held in check. Practice will give you the skill, confidence and courage to succeed as a futures trader.

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Futures traders learn to trust themselves and their system. If you start letting emotion rule your decisions, fear, anger and greed will undermine your carefully planned and practiced strategies. It is by persistently following your system, by dispassionately relying on what your charts tell you, by religiously following your indicators that you will succeed as a futures trader.

When you trade with your emotions, it colors your judgement. You’re no longer trading on your indicators, you’re trading on your gut. And letting your gut rule is like letting it ride in Vegas. Eventually, fear or greed will compel you to make that final disastrous gamble that wipes you out.

The market is an inanimate object. It has no feelings, no agenda, no emotions. If you make a bad trade, you cannot personalize the market. The market is not out to get you. Start thinking this way and you toss logic and wisdom out the window. If you feel yourself getting caught up in emotion, if you feel logic slipping through your fingers, get out. Just stop trading until you can regain control. Every minute you keep trading on your emotions, you come one step closer to disaster. No matter how emotional you become, the market will just sit there. You cannot change the market, you can only react to it.

• There are some days when the demands and pressures of daily life — a fight with the spouse, that fender bender last night, a problem with one of the kids, a leaky roof, a meeting with your banker, etc. — will take up so much of your mental and emotional energy that you simply can’t concentrate. Don’t fight it. If you can’t concentrate fully, don’t trade.

• You may just feel uneasy for no explainable reason. The day may just feel “off” to you. If things don’t feel right mentally, no matter what your logic tells you, sit the day out on the sidelines. Lost opportunity is better than lost money. Don’t take a chance. If it doesn’t feel right, don’t trade.

• Successful traders practice good money management. If you’re trading with money you can’t afford to lose — mortgage money, retirement funds, life savings, money borrowed from a friend or relative, etc. — you’ll be trading scared. The pressure of what will happen if you lose the money will negatively affect your ability to trade successfully. You need a clear head — and a clear conscience — to trade at your best. Don’t trade scared. If you can’t afford to lose the money, don’t trade.

It takes more than knowledge to be a successful futures trader. You must have the self-confidence and courage to trade. Trading takes total concentration. If you can’t keep your head in the game, pack it in until tomorrow.

In futures trading every day is a new day. You must put the failures of yesterday, and particularly any feelings of disappointment and inadequacy they cause, behind you and focus on what is happening in the market today. Dwelling on your losses will only erode your self-confidence and cause you to start second guessing yourself, your system and your decisions. Start down this road and you might as well throw in the towel. Successful futures trading is 90% attitude. Learn from your losses and move on.

D.H. Lawrence wisely said: “If only one could have two lives: the first in which to make one’s mistakes, which seem as if they have to be made; and the second in which to profit by them.”

A futures trader must live both lives simultaneously. He must learn from today’s mistakes to profit tomorrow. Think of it this way: Each mistake, as long as you learn from it, is one less mistake you’ll make in the future. Since there are a limited number of ways you can lose on a trade, each loss becomes a building block toward solid future success. You’ll make mistakes and suffer losses as a futures trader, especially as you’re learning the ropes. But by discovering the lesson in each loss, you will increase your power as a trader. Each loss then becomes a brick in the growing pillar of your success.

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The real lesson I learned from my Dad is “How do you know if this will work unless you try.” Lesson: pull the trigger on the very next trade you see and keep a log of what physically happened and how you felt at each stage.

As you’re building your system and your trading approach, you have to expect to lose sometimes. Losing sends you back to the drawing board. You analyze, study, rethink, figure out why you lost. Keep a log of your losses. Every half dozen or so, sit down and search for the common denominator. When you find it (and you will), stomp on it! Losses should galvanize you to find the faults in your system and destroy the demons in your approach.

You can’t afford to let your losses bog you down. You must consider each loss an opportunity to improve. Losing is not your enemy; it is your teacher. Learn from your losses. Loss is the foundation of future success. Ask any successful man when in his life he felt most alive, most virile, most passionate and he will tell you it was when he was starting out, when he was young and struggling, when he first turned failure into success.

We celebrate success but do not learn from it. We learn from pain, frustration, confusion, uncertainty, inconsistency, disappointment — all forms of loss. You must suffer the agony of defeat before you can achieve the joy of victory! By experiencing all the different ways to lose, futures traders learn how to win.