The equity markets are wild and unpredictable beasts – some trades from them might only take a few minutes to come on wandering by, or alternatively there would be times when trades may be complete no-shows altogether, pretty much leaving you to wait for hours in vain. There will even be times when hordes of them all come stampeding through at the very same time, forcing you to scramble into action.
If you have been trading for even a little while, there is a good chance that you have already experienced the above firsthand, at least once.
What separates the professional from the amateur, however, is what he or she does during the lull period between the trades – when they are in the eye of the storm, waiting, so to speak.
In this article, you will learn what you should and what you should not do during these ‘peaceful’ periods.
Revising Your Personal Rules
Always revise and reread your rules – memorizations and mantras can either fade or become misremembered with time, so there is always the chance that you could have forgotten or overlooked something important, or perhaps something even vital. Often, a quick refresh by looking at your rules is just what the doctor ordered.
Occasionally, a trader might experience the dreaded “Recent Bias Syndrome” – their emotions conflict and interfere with their ability to trade, because their last trade was less-than desirable or less-than profitable than they had hoped.
Looking back over your rules will help you overcome such a problem, if it ever arises.
Newer is Not Always Better
Many new or inexperienced traders will often fall into a vicious pitfall – if they cannot find the trade setups they need, their mounting frustrations could lead them to start looking for a new system or indicator entirely. Sadly enough, this usually ends up with them scratching their heads like confused monkeys, as if they were in some type of zoo exhibit.
For example, it can all snowball downhill from perhaps either a passing comment or inconspicuous action from a rival trader. One trader focuses on trends in a ranging market, and does not have a setup. The other is a range-bound trader, who just made a significant windfall in the ranging market. This could make the trend-trader curious, thus driving him to attempt to trade ranges, even though it is ill advised to do so since his rules are not equipped for it.
The typical result of this misadventure is that the trend-trader usually ends up being badly ‘bitten’ by the market, losing a lot of money in the process.
The morale of this is that you should learn to be independent and not a member of a “sheeple” herd – do not try to copy other traders’ actions, articles’ “how-to” guides, etceteras.
Sharpening that Edge
If you are not trading and you have some spare time, it is worth spending that time reviewing your trade journals. Aside from brainstorming and discovering possible refinements to your current system, you should also consider tweaking it in general so that it forms a closer bond between it and your beliefs.
If you are what people call a “Trend Trader” (mentioned above), it is a safe bet that you will most probably be simply observing the market ranges. Nevertheless, consider this: could you be better at spotting the markets’ ranges, rather than their trends? You may find this hard to believe, but everything you require to do so can be found in your trade journal, since it provides a clear log of all of your recorded, prior trading.
A tip from me is to also record your state of mind and your emotions at the time of each trade – it will make your trade journal an even more effective tool.
By following these suggestions, you can heavily sharpen your trading skills, using the metaphorical grindstone.
Stress Busting and Mental Rejuvenation: Leisure Pursuits
In the markets, there are many openings and chances that will allow you to build up your financial wealth – many traders simply conduct trades for the returns that their transactions bring, just so they can have more time and freedom in their life to spend on leisurely pursuits.
If this sounds like your own, personal creed, you may wish to consider trying your hand at something you have always wanted to do, such as painting or writing (used as examples). Many traders foolishly believe that they can only start perusing such leisure activities in earnest once they have managed to make a significant amount of money.
I wholeheartedly disagree with their mentality and its accompanying notion – by pursuing such activities in your spare time, they can help drive you in both mind and spirit to be a better trader. Those who wait usually end up being constantly stressed, which takes a toll on both their physical and their mental health.
Just remember to make sure that your search effort is not undertaken when the market is not in your favour.
Simply put, learn how to be opportunistic – always strive to improve both your abilities as a trader and yourself as a person, in order to avoid losing your hard-earned money back to the markets.