Viewpoints of a Commodity Trader

By Roy W. Longstreet

Many traders feel that the key to successful and profitable trading lies solely in finding the “perfect system,” or at least a highly profitable trading method. They fail to realize, and never learn, that without understanding themselves, and mastering the psychological aspect of trading, they will never be truly successful. Without the proper discipline and dedication, any system or method becomes ineffective. In this classic book, the attitude, mental discipline, and philosophy required to become a successful trader are explored by veteran trader Roy Longstreet.

• Language: English
• Publisher: Frederick Fell Publishers, Inc.
• Release date: Feb 21, 2018
• ISBN: 9780883913314

Book preview

Longstreet

A Good Man To Know

KNOW THYSELF, Socrates said a long time ago and it’s still good advice.

Most of the traders who lose money in commodities do so primarily because they don’t know what they want to do.

I’ve heard it said that unhappiness consists of not knowing what you want and killing yourself to get it. This is certainly true in commodity trading, and it’s a situation which must not be allowed to continue.

Until you ask yourself and get honest answers to such questions as: Who am I? What do I want to get from commodity trading? How can I best use my talent and my power (money) to get what I want?— until you do this, there are few, if any, advisory services or brokers who can be of much help to you.

It is important that you do not fool yourself. Don’t even try. You just might do it. It is not easy to make money, particularly a lot of money, in commodity trading. But you can do it—if you will pay the price. The price, simply stated, is enlightened self-discipline. You must have a program. You must know your program. You must follow your program.

Making Money With Money

I HAVE MADE MONEY from no money. I have lost money with money, and I have made back the money I lost. Now I must learn to make money with money. This statement, made by a successful trader whom I visited in Rotterdam in the summer of 1963, has stimulated thought.

My observations lead to the conclusion that it is a very real problem. History is replete with instances that it is more difficult to make money with money than to make money without money; this seems particularly true in commodity trading. There is an adage that has come down through the ages that says: A speculator cannot die rich. If he does, he dies before his time.

The problem seems to be of two parts: the character of the market; the ability and ambition of the individual.

Can one who has money continue to do as he did before he had money and be successful? The answer would seem to be No. The structure of the market is such that it is possible for one to start with very little and build a small fortune without much knowledge or information or understanding. With-the-market trading will do it. The difficulty comes when one’s position becomes so large that it is watched by other traders. Now he must have knowledge. A little learning becomes dangerous. He can no longer go with the trend in all of his positions. His knowledge must be adequate to permit him to take positions against the market. Since it is never possible to know everything about anything, he is in constant danger. No longer is he dealing with small profits and small losses. One who has mastered the art of small profits and small losses may have difficulty in adjusting to a program of huge profits and huge losses. The stress points are different.

Perhaps the most important part of the problem is the trader who has come suddenly to a position of importance. Sudden success is heady medicine. Few people can adjust to it quickly. He generally feels that he knows more than he really does.

Successful trading requires four things: knowledge, disciplined courage, money, and the energy to merge the first three properly. Far too many traders try to substitute money for brains and courage, ignoring the principle that a fool and his money are soon parted.

Your First Loss

EXPECT AND ACCEPT. These words apply particularly to the practice of taking losses. Everyone who trades in commodities must at some time take a loss. Those who expect to do so and accept this fact gracefully will be successful in trading. Those who do not expect to do so will prejudice their judgment and allow emotions rather than reason to guide them.

Anyone who trades in commodities takes the position that he knows something that the market has not discounted, or he is taking the position that something will occur in the future that will cause a price change. In either case, there is some chance of being wrong.

Under such circumstances the problem is to know as quickly as possible when you are in error and then to take action to cut your losses to the minimum— hence, the saying, Your first loss is your smallest loss.

I urge you to be on the lookout for signs that you are wrong. Then admit it and run quickly from your position and accept your loss gracefully. Control any emotional desire to blame yourself or someone else. Above all, guard against any infantile reactions when you lose. Reconsider your reasons and judgment that led to your decision to take the position. Often the fault will lie in part or entirely with information you used and not your judgment. And remember the market itself can make a mistake. This state of mind will permit you to take advantage of the next opportunity. Those who brood over their losses always miss the next opportunity, which more than likely will be profitable.

Trading Is an Art

IS IT POSSIBLE to make money with money in commodity trading? Is it possible to do so on a grand scale —not a million dollars, but many, many millions? Can there be a General Motors in commodity trading?

The answer is clearly, Yes. The big question is, How?

The great philosopher Emerson gave the answer many years ago when he stated that a man is as a tree and his wealth is as a vine. The vine can grow no higher than the tree.

The evidence is conclusive that commodity trading is an art. To be successful at it one must be an artist. Such a trader can scale the heights of accomplishment, realizing achievements comparable to those of

Reviews for Viewpoints of a Commodity Trader

[eversuhoshin · Rating: 5 out of 5 stars]

Great book about trading- Wish I read it many years ago.

Here are some lessons that I love-

1. Knowledge and courage. You need to have an edge and the gut to implement (go big)
2. Most traders don't know what they are doing. I agree. I sometimes wonder what is going on-
3. Future is unpredictable. Nothing we can do but we can try our best to limit our downside.
4. Humility. Pride will get you killed in the market.
5. Make sure to make big money when the risk/reward is extremely favorable.
6.Make sure you have an edge. Most people don't have an edge. I certainly feel that my edge needs to be improved A Lot.
7.Short term is super unpredictable.

It's real short and pleasant read overall :D

[MmDavey · Rating: 5 out of 5 stars]

Its the best book I have read ... a must read for any one who wants to trade the markets