core-trading-skills

Today I’d like to confront one of the most difficult challenges for us traders: sitting on our hands. Patience and discipline are not common amongst those who attempt to become full time market participants. And yet, they are possibly two of the most important qualities to possess. Waiting for evident setups, trading evident trends, fading evident ranges, requires both discipline and patience. Let me illustrate my point.

Most aspiring traders have a full-time job and see trading as a way to escape the rat-race. However, once you’ve been working every day, all day, for a certain number of years, it’s difficult to “break the cycle” and understand that quantity (of working hours) does not equate to quality (of work). This is extremely true in trading.

I too fell for this mental trap, so let me guide you through my own battle, so you may avoid making the same mistake.

Seek Quality, not Quantity

When I abandoned full time employment to attempt full-time trading, not only was I extremely ill-equipped, but I also had an extremely strong “work ethic”. Of course, within investment banks and brokers this allows you to scale the ranks and gain an advantage in the workplace.

But when transferred to trading, this leads to inevitable frustration. From day one, I was in front of screens from 6.30 AM all the way to 7PM, with maybe an hour or so for lunch. It was both incredibly intense and incredibly dumb. The fact is: unless you have a method that requires you to devote that much screentime to your trading endeavours, it’s pointless to waste your day like that. On a side note, I do not know of many successful traders that actually need to stay in front of screens that long. Intraday trading is not something I recommend, because the noise-to-signal ratio is extremely high and there just are not that many quality situations each day.

Needless to say, I was overworking myself without receiving any benefit. It was only after a couple of years into my venture, that certain “unknown unknowns” started to appear. One such lesson is that quality always trumps quantity, in trading. If it’s true that 80% of our returns will be produced by 20% of available trades, then we need to be extremly selective.

Stated otherwise: if you do what I did, and sit down “looking” for action, you will definitely find action; however it will most likely be unsuccessful and costly. Instead, sit down and simply observe what is in front of you. Know what to wait for, and trade what you see, not what you would like to see.

If it’s not Evident it’s not there

Here is a video that offers concrete suggestions on how to adopt this concept in your own trading endeavours.

 

About the Author

Justin Paolini is a Forex trader and member of the team at  www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.