Four biggest Mistakes in future trading by Jay Kaeppel (part 2)

We Continue read and mark quotes of this interesting book

Mistake #2 Using too much leverage. ...Leverage is the double-edged sword that makes a few peoples very rich and upon which the majority of futures traders fall...Unfortunately, the blunt answer to the question "why do traders use too much leverage" is "ignorance"...If you do not not have any way to back test your system than the suggested formula for calculating a reasonable amount of capital to trade one contract of a given market is:
((Initial margin * 3)+ Largest overnight  Gap in $)/2

Mistake#3 Failure to controle risk. The sad fact of the matter is that the majority of traders don’t get around to addressing money management issues until after they have suffered an unexpectedly large decline in equity.
...In reality, most traders would benefit from “fearing” the markets more than they presently do. A fear of losing a large chunk of money quickly is what causes traders to keep their guard up...If you can sleep with the level of fluctuations in your account you are far more likely to stick around for the long haul...The costliest mistakes in trading are usually made when the pain of losing money (and/or the fear of losing more money) becomes too great...The primary purpose of using multiple trading methods is to attempt to smooth out the equity fluctuations in your account...
Mistake#4 Lack of discipline...A lack of discipline is defined as failing to do what you should do in a given circumstance...Of the four biggest mistakes in futures trading, a lack of discipline is the most difficult mistake to avoid...If you succumb to fear or greed or ego you become your own worst enemy...The danger is that if you are constantly tinkering with your existing system, then you may never truly develop the confidence in it that you need to have in order to stick with it when the going gets tough...A lack of discipline can destroy even the
most talented and best prepared trader.

In the long-term there is one drawback: In so doing you have stepped down the path of the 90% of futures traders who lose money. Whatever the market did to you to cause you to act this way is not relevant. What is relevant is this: only you can make the decision to turn around and head back toward the right path and to stay there.