How often do you
see big moves in the market like we have seen recently, but you never find
yourself profiting much from them? How often do you close a trade out
prematurely just because it’s gone against you a bit and you ‘freaked out’
because you thought it would result in a bigger loss?
Making ‘fast
money’ and building a small account into a large one, aren’t things that just
‘happen’ to successful traders. As any consistently profitable trader will
admit, it takes a consistent conscious effort to hit big winners in the market.
The inevitable retracements and ‘whip saws’ that hit a market are events that
shake out most amateur and inexperienced traders. The mental discipline
required to simply ‘do nothing’ after you enter a trade, and instead let the
market do the ‘work’, is something that not many traders possess. It’s not
acquired overnight, but it is something that you can develop and grow over
time.
Here are some
tips on how you can give yourself a better shot at catching big moves in the
market…
The psychology of holding a trade.
A simple fact of trading
is that if you want to make a lot of money, you’ve got to have the mental
fortitude to hold trades for longer than you might be comfortable with. The
irony of trading is that to make money ‘fast’ and build your account up, you’ve
got to have patience, and to be clear, I’m not talking about your average
daily-life type of ‘patience’. What I’m talking about here is an iron-clad,
bullet-proof, bad-ass type of patience that 90 to 95% of the world’s population
simply doesn’t possess.
Think about this
for a minute…
Most traders do
very well on a demo account before they go live. Think back to when you were on
demo, or maybe you’re on demo right now. I’m willing to bet you’re holding
trades for a few days or a few weeks even, and you’re not interfering with them
very much. Maybe you’ve even entered a demo trade and not checked it for a week
because you were too busy at work, then when you did check it again you were up
20 or 30%, this is not uncommon.
On a demo account,
traders tend to be less-involved with their trades because they simply don’t care
that much since there’s no real money on the line. The end result is that they stick with their original trade idea
most of the time. This is the main reason why people tend to do very
well on a demo account.
Thus, traders
often do very well on demo for the reasons just discussed, then they get all
psyched up to start trading live and open a live account. However, what happens
most of the time, is that traders become far more involved with their live
trading account, simply because there’s now something at stake; real money.
This over-involvement leads to the trader changing their mind on trades,
jumping in and out of the market with high frequency, second-guessing themselves,
and a whole host of other trading mistakes. The end result is that they don’t
catch any big moves in the market, and they will eventually probably lose
money.
The point is
this; the psychology of holding a trade is a very tricky thing. To succeed on a
live account, you need to do what you did on demo; which is basically just
“less”. It’s hard to achieve, since real money is on the line, but if you
really want to catch big moves in the market and make big money, you’re going
to have figure out a way to ‘sit on your hands’ more often when trading a live
account.
The power of ‘doing nothing’
Trading might be
the world’s most rigorous test of one’s mental discipline and strength. In the
face of a trade that’s moving against you and in negative territory, how will
you react? Conversely, in the face of a trade that is up a nice profit, but has
not yet hit your target, how will you react? The most difficult thing to do in
each of these situations is also the most profitable thing to do over the
long-run; NOTHING.
Closing out a
trade for a small loss, before it hits your stop loss, is an example of letting
fear control you, and doing so directly limits your profit potential because
you’re not giving the trade proper time to play out and you’re also voluntarily
taking a loss.
Closing out a
profitable trade too soon can also be detrimental to your overall trading
success. If you have pre-defined your profit target or profit taking / exit
strategy before entering the trade, you will only be doing yourself a
disservice most of the time by not sticking with that exit strategy.
Remember:
Anything you predefine, before entering a trade, is going to be more logical
and objective, and thus profitable over the long-run, than any decision you
make whilst in a live trade, under the influence of your hard-earned money
being at risk.
The POWER of
simply sitting on your hands and doing absolutely nothing whilst in a live trade,
cannot be over-stated. Your true power and advantage as a retail trader, lies
in your ability to remain patient and in control of your behavior in the
market.
Here are some
tips to help you stick with your original call / trade which will help you catch
bigger moves in the market:
- Don’t look at low time frame charts because even small / meaningless daily chart retraces will make you nervous and shake you out if you’re fixated on them on small time frames.
- Learn to trust your trade and trust your gut. If you don’t learn trust to your trade decisions and see them through, you will never make consistent money over the long-run in the market.
- Don’t over complicate your trading. Trade a simple method like price action trading method and stick to a simple trade management plan, which can be as simple as ‘set and forget’.
- Closing trades early guarantees a loss, don’t ever guarantee yourself a loss in the market unless you really have to! Stick with your original call most of the time unless the price action is clearly changing against your original position. About 90% of the time the best decision is to simply let the market do the ‘work’ and let the trade play out with little to no involvement on your part.
Catching big
moves in the market, building your trading account from a small one into a big
one and becoming a successful long-term trader are all things that can only
happen if you are willing to simply ‘do nothing’ most of the time as your
trades play out. So, you need to ask yourself, are you ready to ‘do nothing’,
or are you going to over-complicate your trading, over-involve yourself in it
and lose money and time as a result?
