The other day I went over to a friend's place and helped him out by doing some welding on a pizza oven he's making.

While I was welding we got into conversation and I mentioned that I aspire to become a trader and am working actively toward this goal.

He chuckled and then told me about how he had given up trading after blowing up in the futures markets, something involving leverage and margin and a loss bigger than his mortgage.

So I asked him if he had properly journaled his trades, had good risk management, proper money management. Yeah, yeah he did all that, he said.

Now, I don't know anything about futures, and my rules make them "off limits" for me, and I am very glad of that. So somebody please explain, how can you have "good risk management" and still over-leverage yourself with futures so that you blow up your account catastrophically? Doesn't make any sense to me.

Second question, if futures are so dangerous, why would somebody such as my friend -- who's a tradesman, not a very experienced trader -- be messing with them? Seems to me you would start off with something safer like trading index ETFs, then work you way up to something like futures and options as you become really consistently profitable.

suko 

Now, I don't know anything about futures, and my rules make them "off limits" for me, and I am very glad of that. So somebody please explain, how can you have "good risk management" and still over-leverage yourself with futures so that you blow up your account catastrophically? Doesn't make any sense to me.

Because rules can get forgotten in the blink of an eye once the red mist has descended.... Just like the look but not touch rule with women.

suko 

Second question, if futures are so dangerous, why would somebody such as my friend -- who's a tradesman, not a very experienced trader -- be messing with them? Seems to me you would start off with something safer like trading index ETFs, then work you way up to something like futures and options as you become really consistently profitable.

Because really glittery things are much, much, much more addictive than just slightly shiny things. Just like sticking to the devil you know and forgetting the grass is always greener with women.

Eventually we age and learn to do a proper cost/benefit analysis, but by then its often waayyyy too late. Bugger.

ratfink 

Eventually we age and learn to do a proper cost/benefit analysis, but by then its often waayyyy too late. Bugger.

One would like to think that the risk intelligence increases with age, but that doesn't always happen.

I've really been drilling down into trading psychology.

I have found an eight week online course in trading psychology that starts in April. Steve Ward.

I think that it would be money well spent if for no other reason than having the money sunk into tuition would cause me to knuckle down for eight weeks and really focus on my psychology. Even if the contents are worthless, the engagement alone might be worth it for me.

Online Trading Psychology Course | High Performance Global Trading Psychology

I got Steve Ward's book, High Performance Trading...

Amazon.com: High Performance Trading: 35 Practical Strategies and Techniques to Enhance Your Trading Psychology and Performance eBook: Steve Ward: Kindle Store

I am going to read that, and if it resonates with me, I will sign up for the course. Book only costs $9.99.

QOTD: “It’s better to have no position than a dumb one”.

Great analogy. It draws comparison between fishing and trading.

How I have now come to view the market action: on one side of the fence a small plucky band of professional traders, on the other side a vast and never-ending horde of other market participants.

... or the few Spartans that slaughtered an entire army.

Since I came to this site and started doing this journal I have lost any illusion about which side of the fence I am now on.



But at least I know where I stand.

Now, I have to hustle and find a way to get over that fence before either the walkers eat me alive or the traders lobotomize me with a piece of #10 rebar.