Wait, Wait, and Then ... Wait Some More

If there were two traders, one of whom was constantly searching for their next trade, and the other of whom was waiting patiently for their next trade, which of the traders is most likely to be profitable? The answer is somwehat obvious from the title of this blog entry, but if you chose the patiently waiting trader, then you are correct.

Patienty waiting for your next trade is a very important part of being a profitable trader. Professional traders are comfortable waiting several days without a single trade if necessary, whereas most amateur traders think that they have to be in a trade in order to make any money, and therefore they make trades at every opportunity.

Waiting patiently for a trade should not be confused with different trading styles. For example, scalping is a very short term trading style, where a trader may make many trades within a short amount of time, and appear to be constantly in a trade. However, within the scalping time frame, a profitable trader will still be waiting patiently for their next trade. The difference is that waiting patiently for a scalper may only require waiting for a couple of minutes, wherease waiting patiently for a day trader may require waiting for several hours.

It is not so much a specific amount of time, but rather an attitude towards trading. Traders who are calm and patient are more likely to make good decisions, whereas traders who are anxious and impatient are very likely to make bad decisions (if any real decisions at all). Many professional traders make their analysis and their decisions before their markets even open, and then act upon their analysis and decisions throughout the trading day. This is in stark contrast to most amateur traders that attempt to make their analysis and decisions in real time, which usually results in bad analysis and decisions.

If you are a trader that seems unable to wait patiently for your next trade (hopefully you can at least recognize the fact), don't despair. It can take a long time (anywhere up to a few years) to develop the psychology necessary for successful trading. In the meantime, there are a couple of possible solutions. If you are making trades too often because you believe that you need to make trades to make money, remember that a few good trades will always make more money than lots of bad trades. If you are making trades too often because you are impatient, try finding something enjoyable but not too distracting, that you can do while you are waiting (e.g. read a book, watch a movie, visit the day trading site).