Lesson 15: Don't be in a hurry

One of the most important rules of success in futures and options trading is the rule that you should not be in a hurry to make a lot of money in this investment activity. I would estimate that 90% of the time a trader makes an investment in a futures or options contract, he or she is sorry that the investment was made within ten days time. Sometimes the investor is sorry at the end of a single day. Yet, if an investor is given a fresh $5000 to trade with, they start looking for a trade to make "tomorrow on the open".

There is simply no reason to be in a hurry in this game except for the fact that you may need the money now. If you do need profits "now", you probably won't make them. If you need profits tomorrow in order to pay Monday's rent, you will still probably not make them. If, however, you develop a successful trading program and learn how to relax and take the profits when they come, you have a pretty good chance of being successful.

It is quite easy to calculate the 'odds' for most futures and options positions you take. I outline how to do this in the books that I have written, especially in my Commodity Trading Manual, and most of you are familiar with my books so I won't repeat here what I have already written about in my manual. One very simple way of calculating the odds of cash wheat advancing after you have purchased a futures contract is simply to locate a yearbook that gives annual cash wheat prices month by month. Examine that yearbook to see how many times cash wheat prices move up during the period of time that you plan to own your futures contract or options position and how many times cash wheat prices move down.

If you buy wheat futures in August and plan to hold until December, compare the average cash price in August with the average cash price in December and you can calculate the "odds" of cash wheat advancing during the period that you plan to hold your long futures contract or options position. If the "odds" are not in your favor, then there will have to be another compelling reason for you to take a long position - and there may well be another compelling reason - such as crop damage due to drought, an increase in exports, a commitment of traders report which supports a long futures position or an options call contract.

Always remember that one of the general rules of success for you should be to understand that you can always lose your money tomorrow, don't be in a hurry to lose it today. Look at your "odds" of success before you take any futures or options position and do not take those positions unless or until the odds are in your favor or only take one if there is a compelling reason for you to do so. Playing cash and futures odds is not just something you do now and then; it is a fundamental principle of successful futures and options trading. I have been writing about "odds" since I first published my earliest edition of the Commodity Trading Manual and if you have not read that book, I recommend it to you. It can be ordered by clicking here.

Think of it this way: If you wanted to go swimming in warm water, would you simply go outside and jump off the bridge into the river and "hope" that the water was warm, or would you take a look at a calendar to see if it is August or December. If you want to swim in warm water, check the calendar first. If you want to succeed in futures and options trading, don't be in a hurry to take a position before you understand whether the cash price of the product whose futures or option contract you are trading normally advances or declines during the period of time that you plan to hold your futures contract or your options position.

To repeat, there is no need to be in a hurry in this investment activity. I would estimate that 90% of the time a trader makes an investment in a futures or options contract, he or she is sorry that the investment was made within ten days time. Sometimes the investor is sorry at the end of a single day. Yet, if an investor is given a fresh $5000 to trade with, they start looking for a trade to make "tomorrow on the open".

There is simply no reason to be in a hurry in this game except for the fact that you may need the money now. If you do need profits "now", you probably won't make them. If you need profits tomorrow in order to pay Monday's rent, you will probably not make them. If, however, you develop a successful trading program and you learn how to relax and take the profits when they come, you have a pretty good chance of being successful.