To Take No Action IS An Action Todays title is an old proverb from eastern culture. It is also an important realization for many developing traders as they progress through the trading ranks. There are two common problems for developing traders. First is a lack of patience. Second is not having the ability to know when doing nothing is the correct, best, and most profitable option. To Take No Action is an Action These problems can show up in two very measurable ways, both of which are common to new and seasoned traders alike. First, traders with the above problems will overtrade. The lack of patience causes them to take a trade before it has developed properly, or to take a trade that was not even in the plan at all. Many traders feel the need to be doing something to put their skills to use. Many fail to understand that sometimes that something should be waiting for the next real opportunity. What is the definition of overtrading? Five trades in a day? How about 20 or 50 or 80? The answer is that the definition of over trading is not a number; it is trading more than what your plan allows. You could take twenty trades and not be over trading; you could take one trade and be guilty. Second, traders with the above problems will have a tendency to exit trades early without good reason. How many times have you exited a good trade for partial profits, and watched from the sidelines as the trade went on to its original target? Or, worse yet, re-entered at a poorly planned entry? Traders who have the need to do something all the time often over manage trades. When they look back, they often had no reason to exit, but may not see this as a problem because they were managing the trade. There are three things that will help. First, just accept the title of this post! The decision to stand aside IS a pro-active decision. Second, you have a well-laid out trading plan this will give the foundation to your trading to stop making decisions from boredom. Third, just ask yourself this question. Am I buying or selling here because this is the proper action based on my plan, or am I just looking for something to do? Taking a lesser quality trade just to trade is the mark of a novice...
Posted on: Mon, 18 Nov 2013 00:46:47 +0000
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