Futures offer traders some of the best profit opportunities, but the dangers are commensurate with the rewards. A trader with good money management skills needn't fear futures. The trouble with these markets is that they don't move in straight lines. Futures do not kill traders, poor money management kills traders. Futures can be very attractive for those who have strong money management skills. They promise high rates of return but demand ice-cold discipline. According to the chaos theory, many processes like the flow of water in a river, the movement of clouds in the sky, the changes of prices in the cotton markets are chaotic, with transient islands of order, called fractal. Those fractal look similar from any distance, whether through a telescope or a microscope. If we look at engineers, we can see that they achieve better control over many processes once they accept them to be chaotic and try to capitalize on temporary fractal, the islands of order.

That's exactly what a good trader does. He recognizes the market as chaotic and unpredictable much of the time, but expects to find islands of order. The best time to make decisions is before you enter a trade. Your money is not at risk, and you can weigh profit targets and loss parameters. Once you're in a trade, you begin to form an attachment to it. The market hypnotizes you and lures you into emotional decisions. This is why you must write down your exit plan and follow it.

Turning a losing trade into an "investment" is a common disease among small private traders, but some institutional traders also suffer from it. Do not put off the hour of reckoning. The first loss is the best loss.

Markets are such cutthroat places that we don't form mutual support groups or find sponsors. They are the most permissive places in the world. You may do any-thing you like, as long as you have enough equity to put on a trade. It's easy to get caught in the excitement, which is why you need rules. Trading is a battle. When you pick up your weapon and put your life on the line, would you rather be drunk or sober? You have to prepare yourself, choose your fight, go in when you are ready, and quit after you've done what you've planned. A man who is cool and sober calmly picks his fights. He enters and leaves when he chooses and not when some bully throws him a challenge. A disciplined player chooses his own game out of hundreds available.

Markets seduce greedy traders into buying positions that are too large for their accounts and then destroy them with a reaction they cannot afford to sit out. They shake fearful traders out of winning trades with brief counter trend spikes before embarking on runaway moves. Lazy traders are the favorite victims of the market, which keeps throwing new tricks at the unprepared. Whatever your psychological flaws and fears, whatever your inner demons, whatever your hidden weaknesses and obsessions, the market will seek them out, find them, and use them against you, like a skilled wrestler uses his opponent's own weight to toss him to the ground.

Discipline is necessary for success in most endeavors, but especially in the markets because they have no external controls. You have to watch yourself because no one else will, except for the margin clerk. You may put on the stupidest and self-destructive trades, but as long as you have enough money in your account, no one will stop you.

Adding to losing positions is similar to over-prescribing narcotics, but nobody will stop you. As a matter of fact, other market participants want you to be undisciplined and impulsive. That makes it easier for them to get your money. Your defense against self-destructiveness is discipline. You have to set up your own rules and follow them in order to prevent self-sabotage. It means doing the right thing, not the easy thing. And the first challenge on the road to disciplined trading involves setting up a record-keeping system.

The traits that lead to success in trading are different from those you learned during your lifetime, those that lead to success in everyday life. You have been taught that perseverance will ultimately lead to triumph, but in trading you need to lose repeatedly to win. This takes conditioning to train your mind to act in manner contrary to what works outside of trading.

In life, it is generally a recipe for disaster to act impulsively; it is better to sit back and reflect upon your situation. In trading, however, you must condition yourself to act quickly without hesitation and unemotionally to cut a loss (or take a profit) when your predetermined point is reached. After you condition your state of mind, you have control over your trading emotions. You have greater confidence when taking losses and entering new positions, because you know your trading plan will prosper over time. Condition your mind to be disciplined, one of the essential qualities for trading success. The key is almost a reverse conditioning to your psyche. Ultimately, if you follow your disciplined plan of cutting losses according to a well-defined

plan, you can't be devastated, because you followed your plan and know that over time it will work for you.