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The markets will typically do the opposite of the trader's emotions.
- Chris Morse |
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Today's Featured Article

In trend following it is widely known that the trend is your friend. Let's examine the importance of the big trades. It is very important to have the trade discipline to stay in a large winning trade. As important is to also have the trade discipline to enter the next trade after a series of losing trades. The large movers are what will usually make a traders year. Let us discuss and illustrate why it is so important to get in the big trade and not get out of the move to early.
The adage goes ride your winners and cut your losses. The best way to do this is with a systematic approach to the markets being followed. We need to know when and where we are going to enter and exit a trade. You also need to know what market the next big trade may be in. I find a diversified portfolio approach works best to find the big trades each year.
In order to participate in the next big trade you first have to be following that market. In commodities there are several market sectors that can have the next important move. The main commodity market sectors are fuels, metals, currencies, grains, interest rates, softs and meats. To put this all together most successful traders will use some type of systematic approach to establish an arsenal of trade signal entries, exits and stops. You can develop your own methods or follow the signals and portfolios of a system developer like TradeThink.
Trend following type trading systems are designed to capture a piece of a markets move when it is trending. Of course, to find the nice trend trades one has to go through periods of choppiness and consolidation in the markets. During the choppy times in the market a trading strategy will be looking for some type of strength or breakout to define a potential new trend. There will be signals given for trades that do not make the final cut and thus turn out to be losers. A losing trade must be entered then exited and a loss taken. Some wining trades will turn out to be losers. Through all of this the trader must keep the faith and have the discipline to keep executing in his trading
method.
Those big winning trades are usually just down the path after many losing trades. You must stay the course and be patient in preparation for the big trade. You may not be completely aware once the big trade comes and know that you are actually in that big trade. This is why trade discipline is so important, because you will not know how the trade turns out until the trade is over. Many traders try to override this fact by perhaps exiting a winning position too soon. Exiting a winner to early may be one of the biggest downfalls of who would otherwise be successful traders. If you stay the coarse you will be rewarded.
Below you will see two charts for each market. The first chart will show a series of chop on small losing trades that will often precede a big winning trade. The second chart is that of the big trade. |
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Euro Currency - Choppy
If you cannot
view the Euro Currency - Choppy chart, go here. You have to have trade discipline to stay with a strategy through the losers. If you stop trading during a series of losing trades you risk missing the next run-up.
Euro Currency - Big Trade
Entry 1.4471 Exit 1.5629 Points 888 888 points at 12.50 = $11,100
If you cannot view the Euro Currency - Big Trade chart, go here. Had you stayed the course in the above Euro trade you were rewarded.
Gold - Choppy
If you cannot view the Gold - Choppy chart
go here. It is not always easy to keep taking losing trades.
Gold - Big Trade Entry 848.00 Exit 993.40 Dollars 145.40 415.40 dollars at 100 = $14,540
If you cannot view the Gold - Big Trade chart,
go here. The trader was rewarded with a big move in Gold above.
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Soybeans - Choppy
If you cannot view the Soybeans - Choppy chart, go here. You had to take a couple of these Bean losers back to back.
Soybeans - Big Trade Entry 1408 Exit 1565 Cents 157
157 cents at 50.00 = $7,850
If you cannot
view the Soybeans - Big Trade chart, go here. A trader that stuck with this Soybean trade was rewarded.
Wheat - Choppy
If you cannot view the Wheat - Choppy chart,
go here. Remember a series of losing trades will often precede a series of winning trades.
Wheat - Big Trade Entry 539.25 Exit 1456.25 Cents 917 917 cents at 50.00 = $45,850
If you cannot view the Wheat - Big Trade chart,
go here. The four big trades above accounted for over $79,000. The losers before the big trades accounted for about only $17,000. That is a net of $62,000.
Things to Remember
A trade does not have its official win or loss until after the exit. Do not pull out of any trades early. Many will pull a trade prematurely. They will see a big winner and want to take profits too soon. The big winning trades can amount to a significant portion of yearly profits. Taking profits too early can be a big mistake.
Take every trade. Do not second guess a valid trading signal if you are serious about your trading strategy. Place your order and enter the trade. Many people cherry pick trades. Usually when someone thinks a market will keep in a trading range or it can not move any higher or lower is when it will keep moving and this is when you might just have found the next big trade.
Disclosure: Commodity trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell commodity interests.
Notice: Returns are hypothetical. Hypothetical or simulated performance returns have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since trades have not actually been executed, the results may have under or over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight, no representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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About the Author

| Chris Morse is the Developer of the TradeThink trading systems. He has been involved in the development of trading strategies for nearly ten years. Recently Mr. Morse has been focusing on the development of a commodity pool. He is registered with the CFTC as a CTA and CPO and a member of the NFA. |
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