Trade Stocks and Commodities with the Insiders: Secrets of the COT Report

CHAPTER 12

Pointers and Thoughts on Trading

Fear not those who argue but those who dodge.

If you don’t learn to fall, you will never learn to fly. Trapeze artists and commodity traders have a great deal in common. We are both trying what few will attempt, and both seek a reward with unusually high risk. Sam Keen, in writing Learning to Fly (Random House, 1999), has produced a delightful read for trapeze artists as well as traders.

The fundamental principle of trapeze artistry is, “Learn the fall before the trick; prepare for failure.” I can think of no greater counsel to provide traders. Most of us are so revved up to trade, to make a million, to do a triple somersault with a double twist, that we forget the risks we are taking.

Truly, until you learn the best way of failing or losing, which will surely happen to you as a trader, you will not be in the game long enough to become a winner.

Trapeze performers begin learning their trade rigged up in harnesses with spotters who are able to pull on ropes to protect them from injury. I’d call that paper trading.

From harnesses they matriculate to flying through the air, but with a net underneath them. The net is not a simple or sure thing. Landing in the net incorrectly can cause severe damage, so they practice landing in those nets, day after day. Their nets are like our stop-loss orders. Used incorrectly they can cause major problems, but used correctly they will save your financial and emotional life.

THE ART OF USING STOPS