Stock Symbol

Adding to the problem is that many futures traders have virtually no objective trading system but, through the application and development of discipline, have achieved success. On the other hand, many futures traders use excellent trading systems but still lack the discipline to be successful. What frustrates them, adding to their woes, is that in spite of compelling statistical evidence supporting the validity of their systems, they still fail to generate profits in real time. Discipline can transform a marginally successful trading system into a highly profitable one. Lack of discipline, on the other hand, can degrade a potentially successful trading system into a losing proposition.

The purpose of this chapter is twofold: First, to emphasize the importance of discipline as a key element for success in any market; and, second, to suggest a number of ways in which discipline can be developed and improved. Let's first examine how discipline func­tions as well as its critical importance in the development and maintenance of a profitable trading methodology.

In the Eyes of Discipline: SSFs Not Unique

Although the SSF as a trading instrument is unique and unprecedented, another aspect of SSFs is not at all unique. SSFs are subject to the same limitations as are all forms of trading. By limitations I mean that trader error is more of a limiting factor than is a trading system or method. Even though SSF trading may offer new and exciting profit possibilities, this potential is limited by the weakest link in the chain, which is, and has always been, the trader.

I How Discipline Impacts Profits

There are literally thousands of approaches to futures trading. Some are potentially more profitable than others; some are simple

and easily applied, whereas others are complex; some are logical and some not so logical. Regardless of the trading approach one employs, all trading systems and methods have certain elements in common. Three of these are as follows:

•  Specific signals (rules) for determining entry and exit of long
and short positions as well as stop losses and trailing stop
losses (where used).

•  Specific parameters and methods of calculating timing signals
that are consistent, operational, and capable of being repli­
cated by other traders with access to the same information
and methods.

•  Specific trading actions and procedures that must be imple­
mented as a function of information generated by points 1
and 2.

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