Those of you who day trade with me everyday know that I have a big potty mouth. Part of it is because I am a New Yorker and we use the f-word as an adjective, adverb, noun and verb in almost every other sentence. Part of it is just my own iconoclastic personality that likes to mock polite society. Part of it is me reading somewhere that people who curse are actually more creative.
Regardless of the reason f-bombs fly in my room all time, often as a matter of frustration, sometimes as an exclamation of wonderment at whatever the market is doing. But recently I realized that although it's probably the most common four letter word in the trader’s vocabulary it is not the most powerful. That distinction goes to another four letter word that is often overlooked but shouldn’t be.
The most important four letter word in trading is... wait.
This is kind of ironic since trading and especially day trading is supposed to be all about speed. The faster you react, the better price you get, the more profit you make. Yadda, yadda, yadda. But that is no longer true. The days of front-running “paper” are long gone. HFT algos will beat you to the punch every time. Speed is now the domain of the machines and humans need to compete on longer time frames where analysis and nuance are the true edges to exploit.
But of course as humans we are easily distracted by the newest shiny thing. How many of us have jumped onto a price move before it confirmed our setup because we were one million percent confident that price was going up or down, only to have the market reverse and rip our face off? I am certain that anyone who has day traded and reading this now has had that happen to them multiple times. In fact, I could make a strong case that the majority of losing trades in your portfolio are not the result of your setup, but rather a function of you jumping the gun. That’s certainly been the case with me.
One of the problems with “creative” people is that we think we know everything ahead of anyone else and jump into action before the market actually confirms our thesis.
One thing learned from the school of “hard knocks” is that price follows momentum. It doesn’t matter how you measure it, it doesn’t matter what indicator you use. The bottom line is that if momentum is negative, price action is unlikely to turn positive and vice versa. After years of trying to catch falling knives or fade rocket moonshots I have finally learned to ... wait.
The momentum to price dynamic is by no means a guarantee of success but it is a tremendous filter for avoiding bad ideas. The thing about trading is that if you are right it doesn’t matter if you are late and if you are wrong it won’t help to be early. So you might as well wait and let that magic four letter word help you perfect your edge.
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD: The first downside target is seen at the 1.2600–1.2605 zone
GBP/USD trades on a weaker note around 1.2620 during the early European session on Friday. The decline of Pound Sterling is backed by the growing speculation that the Bank of England will begin the rate-cut cycle this year.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.
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.