When Not To Trade Is Very Important Trading Decision Too
Last few days have been sideways range days and the up moves as well as down moves are very fragile and they are not holding up. I have received many pms, phone calls from traders who are either trading their own methods or trading on calls given by others . And as these systems are mostly trend following systems they are hitting stoplosses regularly . Some call services have had 8-12 stops hit consecutively on full quantity, thus seriously damaging the trading account of some traders.
Trend following methods need sustained trends in the timeframe which we trade. Though the market trends only 25-30 % time, there is a trend on larger or smaller timeframe. Trend following systems cannot make money in sideways markets where trends are not durable tossing us in both the directions.
I have done some posts about how to know whether the market is trending or not. A trader has to understand the structure of the market he is trading and mindlessly following trend following systems in sideways, small range markets saying that " Descipline and Faith on the system will make money finally" is like banging our heads against a wall and saying if we do it with discipline and faith,one day the wall will break..
It may put our heads out of shape.
In such markets it is better to step back and not to trade till the market is in the sideways range....or trading smaller lots is very essential in preserving the capital and being able to keep the gun powder dry so that when the market comes out of the range and starts trending we can go with all guns firing.Large and continuous losses also put pressure on the mind of the trader and I really wonder whether after 10-12 continuous losses even most " disciplined" trader also will be able to take 13th and 14 th trade.......everyone should ask this question to our own minds....After sideways phase a trend will always come....it is much more cyclical in nature...so be financially fit to take full advantage of the trending phase...In sideways phase, the goal should be trading small, less frequently to preserve the capital
So preserve your capital, trade small in sideways markets.....dont do "Financial Harakiri" in the name of discipline. Remember that " When not to trade is very important trading decision"
Smart_trade
Last few days have been sideways range days and the up moves as well as down moves are very fragile and they are not holding up. I have received many pms, phone calls from traders who are either trading their own methods or trading on calls given by others . And as these systems are mostly trend following systems they are hitting stoplosses regularly . Some call services have had 8-12 stops hit consecutively on full quantity, thus seriously damaging the trading account of some traders.
Trend following methods need sustained trends in the timeframe which we trade. Though the market trends only 25-30 % time, there is a trend on larger or smaller timeframe. Trend following systems cannot make money in sideways markets where trends are not durable tossing us in both the directions.
I have done some posts about how to know whether the market is trending or not. A trader has to understand the structure of the market he is trading and mindlessly following trend following systems in sideways, small range markets saying that " Descipline and Faith on the system will make money finally" is like banging our heads against a wall and saying if we do it with discipline and faith,one day the wall will break..
It may put our heads out of shape.In such markets it is better to step back and not to trade till the market is in the sideways range....or trading smaller lots is very essential in preserving the capital and being able to keep the gun powder dry so that when the market comes out of the range and starts trending we can go with all guns firing.Large and continuous losses also put pressure on the mind of the trader and I really wonder whether after 10-12 continuous losses even most " disciplined" trader also will be able to take 13th and 14 th trade.......everyone should ask this question to our own minds....After sideways phase a trend will always come....it is much more cyclical in nature...so be financially fit to take full advantage of the trending phase...In sideways phase, the goal should be trading small, less frequently to preserve the capital
So preserve your capital, trade small in sideways markets.....dont do "Financial Harakiri" in the name of discipline. Remember that " When not to trade is very important trading decision"
Smart_trade
It's a common phenomenon that a day trader has to trade in any day.
ReplyDeleteIts difficult for people to sit on the fence & watch range days.
We also get lot of distractions on the range days in the form of TV , chat programes,websites, peer calls,etc etc to pass our boredom,
These are real distractions which need to be avoided & keep concentrating on the charts for a suitable opportunity.
On watching intra day charts at the end of day even on these boring sideways days shows 1-2 scalp trades which can be a day traders delight.
We have very less patience.
Yes Sunando, we have to be more alert and focussed on sideways days as window of opportunity is generally for short time.
ReplyDeleteSmart_trade