I’m sitting in front of my trading screens for the first time in a few days. I have always warned clients to be really careful about trading this time of year because of low volume and because of the end of the year institutional moving and shaking that generates sharp, out-of-the-blue 30-minute rallies, followed by complete retracement for no explicable reason that are exacerbated by the low volume. This year we have the additional special treat of the political circus du jour surrounding the “fiscal cliff”. It is a perfect storm of randomness.
Screen based traders spend small fortunes on secrets, software, gurus, books, mentoring, etc., etc, before some begin to realize there are no magic secrets and trading is actually a profession like other serious professions that requires knowledge, study and experience to gain anything resembling proficiency. The real secret about trading is, that unfortunately, there is no secret and there is a learning curve involved that is possible to shorten but not eliminate.
Let me share with you one of the most powerful “secrets” you could hope to find. It really must be a secret because you certainly never hear this promoted. NOT TRADING IS TRADING. The biggest edge every screen based trader has is the ability to NOT TRADE. Not every market condition is conducive to trading. For instance, the present one. Just say no. Let Hal 2000 and Hal 2001 go at it. You don’t have to be a liquidity provider.
I am always encouraging my clients to let the market come to them. It is very empowering when you learn you can sit there and not trade, but that it is actually doing something to not trade – you can do some really great trading by NOT TRADING.
Over-trading is a huge issue with most traders. The industry promotes over-trading from the top down. Why wouldn’t it? It is a transaction based industry. Regardless of the timeframe being traded, most traders could dramatically improve their results by trading less.
Resolve in 2013 to use the incredible inherent edge a screen based trader has to NOT TRADE. Trade only when market condition, trade location and your trade plan all come together.
Now, consider sitting back and enjoying the circus. When the circus tents are finally packed and the donkeys, elephants and other clowns leave town and something resembling normalcy returns to the markets, start looking for some trades. Trust me, they will be there, and on your terms!