When it comes to trading majority of us have the mind-set that we need to get involved in as many as trades as we possibly can, to most of us that would make sense wouldn’t it?
If we get involved in more trades then we have a higher chance of being right and making money?
Well in hind-sight that would make sense, however in reality the truth is that the more trades you get involved in the more chance you have of being wrong and in the process lose more money.
Why is this?
Well, it comes down to over exposing yourself in the markets, emotional attachment and the quality of the trades you are actually taking. As I previously said the more trades you take the higher the chance of being wrong and what dictates that is the quality and probability of them trades being winners.
There are a million ways you could get involved in the markets, however what you need to be focusing on is getting involved in them high probability setups that provide you with an edge by meeting your trades plan rules of entry.
The problem for many is that when you are focusing on high quality and probability trades they don’t come as often as what we would like at times. This is then when your patience as a trader will be tested, as you might not get involved in a trade for few days or maybe even in a week (Depending on your style of trading).
The reason this proves to be a problem is because how we are raised by our parents, school and society. We are taught that unless we are doing something then we are doing nothing and that we need to be active to be productive.
However, you can be actively doing something by standing still because sometimes the best thing you can do is stand still, especially in trading. Just because you are not doing something right now doesn’t mean you are not active, what you are actually doing is being patient and respecting the market.
Because we want the market to tell us when to get involved in a trade setup by our entry reasons of our trade plan being met. So, what initially looks like doing nothing is actually doing something, it just doesn’t feel like it.
At the end of the day, as traders we have no idea for the short-term result of any given trade but if we wait and let the market fulfil our trade plans rules and because we have tested our trade plan and we know it provides a positive expectancy (at least it should do) then out of Y amount of trades taken X amount should be winners and losers.
The best traders in the world have a system and they sit on their hands and wait for the market to tell them when to enter.
Because they only care to get involved in setups, where they have an edge and the highest possibility of being right not only in the short-term but the long-term because their objective is to make a positive ROI.
If you get involved in poor quality trades, you will develop emotional attachment to them trades through the monetary value of your account because for every trade that you lose that
is another X% of your account stripped away from you.
This will then result in you picking and choosing what trades you actively get involved and the fact is you have no idea which setup will win or lose.
That is why it is essential to have a system in place that tells you exactly when to get involved so that you don’t have the ability to pick and choose but when your systems rules are met you HAVE to take the trade because that is what your system tells you to do!
Also, that’s why you need to test your system to ensure it has a positive expectancy because if it does then the short-term losses will not matter because you should only be focused on the long-term result. It will then make it much easier to trade through the losses, as you will realise they are a part of the process to the long-term goal!
So, when it comes to trading the best thing to do more often than not is nothing and stand still until you have reason to move or react by that of the market telling you it is now time to move!