Importance of emotional stability for trading in edible oil futures
Emotional stability is so very important when it comes to futures and options trading , or derivatives trading. In my twenty years experience in dealing with commodity futures, I have seen many corporations and individual traders in the edible oi industry who are tigers on physical trading, but pussy cats when it comes to futures trading.
They are not afraid to run huge losses in the cash market hoping for prices to move in their favour, but that is not the case when it comes to futures trading. The same tigers are so impatient when it comes to their stop loss getting hit in futures. They get so irritated and loose their mental stability, which is so pertinent in commodity futures trading.
The most important risk management strategy in futures trading is a stop loss. I have tried so many many times to drill this concept of stop loss into the minds of traders and needless to say only a handful have understood and embraced the concept so far. I think it is mostly due to their confidence in holding on to cash market positions that bleed out of the money only to come back in money subsequently. But, this holding period comes with huge amount of stress, hope and loss of health. Suddenly, god comes into the picture and deals are done with Lord Balaji the deity for prosperity to rescue out of the situation. After the cash position comes back in the money, a visit to Tirupathi is a must to thank god for his kindness and pay back the promised debt.