The first step in dealing with burning out when trading commodities contracts is to prevent it from happening in the first place. Trading commodities and futures has an inherently high level of stress and creating a plan to deal with stress leading to burn out is the best strategy.
Taking a vacation is one of the best ways to deal with stress of trading. These vacations should be stress reducing vacations, to reduce the level of adrenaline and calm your nervous system. Reading a book for a few days or going for a long drive can do a lot to help you maintain proper balance and energy levels.
Another excellent way to reduce stress is to exercise. It doesn’t have to be strenuous exercise such as running or weight lifting, simple basic exercise like stretching and taking daily walks is enough to keep your body in a balanced state. I take extended walks and hike almost every weekend to maintain my sense of balance and to reduce stress level. The key is to maintain the walks on a regular basis so that your body can get rid of build up tension and stress on a daily basis. Walking also puts very little wear and tear on your knees.
I personally know two very successful traders who didn’t know when to stop and kept pushing themselves very hard. They didn’t have an outlet to reduce their stress level and when family member and friends kept telling them to slow down, they ignored the advice. One trader had a minor heart attack and stopped trading for 6 months to regain his health while the other trader developed severe anxiety and had to be put on antidepressants for several months.
By being aware of your stress level is very important so that you know how far you can push your mind and body. A human being is like a machine it can only function when all components are working together. If stress affects any part of your mind or body it can have a cumulative effect on your trading and more importantly your health. Take the time to evaluate how you feel on a daily basis and take breaks when necessary to prevent mental and physical burn out.
One of the biggest causes of stress for futures and commodity traders is not adapting to changing market conditions. Many traders get used to the market behaving a certain way and learn how to trade specific patterns that repeat during these periods of time. The market then changes and the trader encounters problems adjusting to the different in the way the market is trading.
Often times after markets exhibit strong trends for few weeks to months, the market enters a choppy sideways range bound trading range. During this period of time many traders successfully trade reversal patterns with uncanny degree of accuracy, because the market is consistently trading in a tight trading range. The trader has a good degree of success and develops strong confidence in his trading abilities. Then the market begins a trending phase and the trader gives back everything he lost trading reversal patterns and gets discouraged about his abilities as a trader.
Markets are living entities in constant change and the key to trading survival is to learn to recognize change and adapt. Traders who are rigid in their thinking and do not change when the market begins exhibiting different characteristics, will undoubtedly suffer the consequences of being out of tune with the market and will make things even worse by forcing their ideas and projecting on the market what they believe the market should be doing instead of taking clues and adjusting their trading style to work in the environment that the market is providing at the present time. Often time’s traders find it difficult to change their approach because their old approach to trading has worked well for extended periods of time.
This behavior often occurs in different business industries and day trading is not immune from it. To give you an example, I have a good friend who is in the real estate business. He began his career in the early 2000 when the real estate market began a bull run. Over the next six years he became very successful and developed a method of getting new clients by making 50 calls each day 7 days per week to different people he knew.
This was his strategy for getting clients, he was diligent in his phone calls and his method worked. Forwarding things to late 2006, my friend had not closed a single escrow in several months, he continued calling 50 people per day but the results were completely different, no one was interested in buying homes. My friend incorrectly concluded that he was doing something wrong and that he was no longer a good real estate broker.
The website even has a section that defines each type of report and gives you basic information so you understand what the report is based on. There’s even a subscription options where you can get weekly economic updates and schedule Emailed to you at no cost. You can specify if you are interested in global information or only US economic news.
What most professional traders do is simply wait till after the report to start initiating positions, if the report is scheduled for morning release. If there is an existing position, the position is usually liquidated and reinstated after 5 minutes have passed from the times the news was released; this provides the market with adequate time to digest the information and price it into the market.
The only other situation which you should apply the seven minute trading ban rule to is during quarterly earnings season and only when the top 10 stocks that make up the index are due to be released.
You should have a list of the top 10 stocks that make up each of the E-mini’s on the Globex and the Russell 2000 on the Ice and have these stocks on your radar at all times. Each of the indexes is highly influenced by the movement of the top companies within each index; these companies are the biggest movers within the index. Therefore it’s imperative that you keep an eye on the long term, midterm and short term direction of these stocks, in addition to knowing exactly what day and time of day their earnings are going to be releases.
There are two things to keep in mind, the first one is stocks earnings generally come out after the closing bell, but there are exceptions. You should always check ahead of time so you know the earnings schedule for each of these securities.
The second thing to keep in mind is the stocks that make up the index do change from time to time. It doesn’t happen very often but it happens often enough that you need to check the index annually to make sure the stocks that make up the top 10 are still the same.