Business Psychology
Lately, I've been studying the futures markets in my spare time in an attempt to try to make a few bucks, eventually. I came across a study guide by the New York Board of Trade a few days ago and it contained a really good chapter about the psychology of futures traders. I really enjoyed this chapter because I could identify with a lot of the same thoughts and emotions that occur when certain situations happen in life. So, I thought I'd paste the entire chapter into my blog for you all to enjoy. This chapter is very applicable to business and life in general, so when you encounter certain futures trading specific words, try to replace them with other things that are applicable to your life and business (assuming you aren't a stock or futures trader).

"Ego-inflation that comes from winning trades can lead to major losses. Winning can create powerful emotions that distort reality. The more you win, the better you feel, and your ego takes over. This euphoria may cause you to abandon sound trading principles and trade recklessly. If this happens, large losses almost always follow. Recognize that you are the person responsible for winning or losing. Don't blame the market or your broker. Losses are an opportunity to focus on whatever problems occurred when selecting the trade or during the trade. If you get caught up in personal denial, you won't learn those lessons and, therefore, will probably repeat them. A successful trader quantifies, analyzes, truly understands, and accepts risk. Emotional and psychological acceptance of risk is what determines your mental state in each trade. Individual risk tolerance makes each trader different. Select a trading methodology that reflects your tolerance for risk. As traders, the more we can detach ourselves from the emotions of hope, greed, and fear, the better our chances for trading success. Why are there thousands of good market analysts but few good traders? Perhaps they need to spend more time on psychology and less time on methodology. Feelings are not knowledge. This is particularly true about trading futures. The normal tendency is to feel good about taking a profit (however small) and to feel badly about taking a loss. When taking a loss, traders are forced to admit they were wrong. How many people readily admit they are wrong? In an attempt to avoid that, most traders postpone taking the small loss. 'Maybe the market will turn' or 'We'll give it one more day' or, 'We'll watch it' are some of the insidious excuses people make for not cutting losses short. The inevitable result is the 'small profits, large losses disease,' the reason why most speculators do not make money, even with otherwise great trading strategies. Unless the trader is determined to conquer his or her emotions, it is pointless to discuss trading strategies or market direction. Trading will at best become an enjoyable albeit costly pastime. I think most speculators lose money because their pride or ego prevents them from exiting with small losses. You're not early, you're wrong! Get out! After studying successful and unsuccessful brokers and traders for several years, I am convinced that there are two characteristics you must bring to your futures trading. They are humility and respect. Humility is the quality or state of being humble, not arrogant or assertive, not proud or haughty. Most speculators do not accept that they will be wrong on a certain percentage of their trades. Therefore, they are constitutionally unable to exit small losing trades before they become big losers. This is the single biggest difference I have observed between winning and losing futures speculators. Your first loss will be your least loss. Get out of losing positions and move on to the next trade. It seems the human brain has a difficult time identifying and focusing on new opportunities when it is trying to manage a crisis on another front. Again, cut the bad trades and move on to the next trade. Respect means to hold in high or special regard. Respect PRICE. Price is a loaded gun that can go off in any direction at any time. Don't get caught up in what one broker, trading advisor, research report, or news item says about what the price is going to do, no matter how certain they are. You must respect what the price does. The price contains all the fundamental data, news, hype, fears, hopes, greed, and wishes of the market participants. Your analytical, unemotional job is to focus on the price and the direction it's moving-and what an adverse price move could do to you. NEVER BUCK THE TREND. Furthermore, when price direction changes, don't get caught up trying to find out why it has changed. Be humble-don't get mad, excited, and resentful about the change. Accept it. Later, you'll read why it changed in the paper. I have two analogies my clients have found useful. The first is: 'Never enter a potentially hostile place unless you know where to exit.' If you don't know where to place your stop loss order to get out of the trade, don't go into that trade. The second analogy: Price is a train with an unknown destination. It may start slowly one way, but it may reverse its direction at any time. If you think you can pick the exact place the train will change direction (picking a top or bottom), be prepared to be run over by the train. During consolidation (choppy markets), the train is at the depot determining what direction it will go next. Don't be misled by those false moves: lurching forward and jerking backward several times. The speculator should be prepared to hop on a moving train only after it has gotten up a head of steam and actually committed to moving in one direction or the other. Boarding a train before direction is firmly established often leads to journeys we wish we had not taken. Moral: Ride the train in the direction it's going and avoid markets in consolidation."