The idea that staying OUT of the market is a means of making money in trading sounds completely counter intuitive, but yes, staying out of the market is very often the most profitable option.
In trading it is far, far easier to lose money than make it. Novice traders all too often believe that it is a fast track to wealth, and the way forward is simply to start trading, in earnest. With a hunger for success many hours will be spent glued to the charts in the eager belief that there must be at least one or more trade set-ups staring them in the face waiting to be taken, that time away from the charts equals missed opportunities. After all it makes sense to our conventional mind-set that time at work equals money earned, and the more time put in the higher the pay. The markets however don’t work like that, and it is this very eagerness to keep trading, no matter what, that is always the undoing of novice traders.
Staying out of the market, until the conditions are right, is the key to success. Trading, because you feel you must trade in order to be a trader, will only lead to disappointment and pain.
In order to understand what ‘staying out of the market until the conditions are right’ means, it is necessary to have some form of measurement or yardstick by which you can judge the conditions of the market, and whether the conditions are appropriate for trading. This is a first and fundamental step. It is known as a strategy and encapsulates your understanding of market conditions and whether they are appropriate for trading in the style that you like to trade; i.e., end of day or during the day.
There is a well-known saying in trading that states the order of priority is capital preservation FIRST, then capital growth. This is derived from the ease with which it is to lose capital. Therefore unless the market is doing whatever it needs to do to tick all the boxes of your strategy and trade plan, then staying out of the market is paramount. There is a lot of talk about the need for discipline in trading and this is exactly why: staying out when you know you should is really important. Do not allow yourself to be tempted. Easier said than done, especially if a trade has not been placed for a while, but it is the discipline to stay out when you know you should that makes the difference between long-term capital growth and loss. A novice trader will tend to be frustrated by staying out the market if conditions aren’t right; the professional or seasoned trader will simply recognise the opportunity to preserve capital, but remain vigilant to the opportunities when they do arrive, choosing only the very best set-ups with the highest probabilities of success.
In trading quality is always the preferred option to quantity. For long term success, and peace of mind, it is the only option.
In trading it is far, far easier to lose money than make it. Novice traders all too often believe that it is a fast track to wealth, and the way forward is simply to start trading, in earnest. With a hunger for success many hours will be spent glued to the charts in the eager belief that there must be at least one or more trade set-ups staring them in the face waiting to be taken, that time away from the charts equals missed opportunities. After all it makes sense to our conventional mind-set that time at work equals money earned, and the more time put in the higher the pay. The markets however don’t work like that, and it is this very eagerness to keep trading, no matter what, that is always the undoing of novice traders.
Staying out of the market, until the conditions are right, is the key to success. Trading, because you feel you must trade in order to be a trader, will only lead to disappointment and pain.
In order to understand what ‘staying out of the market until the conditions are right’ means, it is necessary to have some form of measurement or yardstick by which you can judge the conditions of the market, and whether the conditions are appropriate for trading. This is a first and fundamental step. It is known as a strategy and encapsulates your understanding of market conditions and whether they are appropriate for trading in the style that you like to trade; i.e., end of day or during the day.
There is a well-known saying in trading that states the order of priority is capital preservation FIRST, then capital growth. This is derived from the ease with which it is to lose capital. Therefore unless the market is doing whatever it needs to do to tick all the boxes of your strategy and trade plan, then staying out of the market is paramount. There is a lot of talk about the need for discipline in trading and this is exactly why: staying out when you know you should is really important. Do not allow yourself to be tempted. Easier said than done, especially if a trade has not been placed for a while, but it is the discipline to stay out when you know you should that makes the difference between long-term capital growth and loss. A novice trader will tend to be frustrated by staying out the market if conditions aren’t right; the professional or seasoned trader will simply recognise the opportunity to preserve capital, but remain vigilant to the opportunities when they do arrive, choosing only the very best set-ups with the highest probabilities of success.
In trading quality is always the preferred option to quantity. For long term success, and peace of mind, it is the only option.
Editors’ Picks
EUR/USD remains above 1.0700 amid expectations of Fed refraining from further rate hikes
EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday.
GBP/USD gains traction above 1.2500, Fed keeps rates steady
GBP/USD gains traction near 1.2535 during the early Thursday. The uptick of the major pair is supported by the sharp decline of the US Dollar after the US Federal Reserve left its interest rate unchanged.
USD/JPY holds rebound near 156.00 after probable Japan's intervention-led crash
USD/JPY consolidates the rebound near 156.00, having lost nearly 450 pips in some minutes after the Japanese Yen rallied hard on another suspected Japan FX market intervention in the late American session on Wednesday.
Editors’ Picks
EUR/USD remains above 1.0700 amid expectations of Fed refraining from further rate hikes
EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday.
GBP/USD gains traction above 1.2500, Fed keeps rates steady
GBP/USD gains traction near 1.2535 during the early Thursday. The uptick of the major pair is supported by the sharp decline of the US Dollar after the US Federal Reserve left its interest rate unchanged.
Gold price struggles for a firm intraday direction, hover above $2,300
Gold price fails to lure buyers amid a fresh leg up in the US bond yields, modest USD uptick. A positive risk tone also contributes to capping the upside for the safe-haven precious metal. Traders, however, might prefer to wait for the US NFP report before placing aggressive bets.
Top 3 Price Prediction BTC, ETH, XRP: Altcoins to pump once BTC bottoms out, slow grind up for now
Bitcoin reclaiming above $59,200 would hint that BTC has already bottomed out, setting the tone for a run north. Ethereum holding above $2,900 keeps a bullish reversal pattern viable despite falling momentum. Ripple coils up for a move north as XRP bulls defend $0.5000.
Fed meeting: The hawkish pivot that never was, and the massive surge in the Yen
The Fed’s latest meeting is over, and the tone was more dovish than expected, but that is because the rate hike hype in the US was over-egged, and rate cut hopes had been pared back too far in recent weeks.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.