Trading is a business where "we get paid to do nothing, we lose money when we do too much."
Nothing is more rewarding in trading, than to sit and await for the excellent setups. However, at first it may not seem right. In any other aspect of life, we need to act in order to get reward. In our daily job we can't not just sit at home and expect our monthly paycheck delivered to our mail box.
Nial Fuller, in his blog: Learn to Trade the Market shared a nice post about how to trade patiently:
- Trading always starts with the signal - scan the market you are focused in and first look for a clear signal of one of the setups in your own trading plan. If you mastered your trading strategy this should be a very easy and quick task. You simply looking for obvious presence of your trading edge. If nothing stands out to your attention after 10 minutes or so of analyzing the markets, the probability is that nothing worth risking your money on. Don't try to convince yourself there's something worth trading.
- Looking for support and resistance levels - The next thing you'll do is see if it lines up with any obvious levels. In doing this, you have to determine what a key level is v.s a level that isn't as significant.
- Gauge market conditions - Is it consolidating or trending? If it is trending, is it in a strong trend or is it slowly grinding higher or lower? Is the market range-bounding? Make sure your signal makes sense in the context of the current market conditions. For example, maybe you see a decent selling signal but it against a very strong bullish trend. It is probably better to stand aside.
- Make your own daily commentary - making a note or trading journal of your favorite markets is a good way to get an objective view of the charts each day. Using guidelines in your trading plan, make notes about what you see. Then once you finish with your 5 - 10 favorite markets, re-read your comments and see if there is anything really stands out to you. This process will prevent you from impulsive trading and give you a good overview of what's happening in the market thus help you to better understand the overall market picture. It will help you stay "in-tune" with the markets and will work to develop your trading sense.
- When you're done, you're done - Once you get through this routine, you have two possible outcomes: there's either a trade or there's not. This act alone will almost completely cut out the temptation to over-trade. The reason why most traders failed. You aren't going to help anything by looking at the markets and staring at your trades.
Be like a cheetah, the fastest animal yet very patience not to waste its energy on low probability prey.
