Lessons from the Pros

India Markets

Not Trading Is A Trading Decision

There is a lot of unnecessary pressure placed on traders. We place the most pressure on ourselves. After completing an education program and opening our trading account, we feel that we must trade as much as possible.  There is a desire to try and profit from our trading knowledge as quickly as possible. The problem is that; trading is more of a marathon than a sprint. The only person who benefits from your over trading is the broker you are paying commissions to.

Take a look at the following chart of Axis Bank. There weren’t any high quality trading opportunities presenting themselves that particular morning. As an educated trader, you should know that you should only risk your money on low risk, highly profitable, and highly probable trades. If there aren’t any you should either wait or look at other securities.

axis morning

What is worse is that the impatient traders who tried to jump in long at the breakouts to new daily highs were immediately punished as price turned sharply and dropped to new lows.

axis afternoon

Even if you tried to short as prices plummeted, you were in for a loss if you didn’t exit quickly.  Prices bounced to close near their opening price.

axis daily indecision

My students will sometimes complain that I am requiring them to take too many steps before entering a trade. They soon realize that the process of completing an odds enhancer worksheet and also a trade plan for every trade is not just for them to filter out bad trades. It is also to help slow them down so they minimize impulsiveness in their trading and only put their money at risk in high quality opportunities with a high probability of success.

Even if you were to go through a whole trading day without executing a single trade, you did not waste your time. You gained experience in reading price action and building your trading discipline. Discipline is a major contributor to successful trading and those of us who can be disciplined to not trade when there is high risk are the ones who are more likely to succeed.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.