The Dirtiest Word in Trading
Patience is the dirtiest word in finance and it doesn’t matter whether you are hyperkinetic daytrader doing 50 round turns per day or a sedate investor who holds positions for years. The key to success in financial market always depends on patience.
If you are an investor -- you are basically trading time for money. Investors in equities rely on the upward drift in stocks which reflect the overall growth in economy. Anyone who invests into commodities or currencies is not an investor. Those are bounded asset classes that have no long term appreciation. They are range bound by definition so time does not help you. Want to argue that point? Ok tell me how your gold trade has been doing for the past 40 years ( I know, I know -- its just a matter of time before civilization collapses and your bars will be worth billions!)
In the meantime for those of us who want to make money NOW, we need to appreciate the value of patience in the dog eat dog world of trading. You may find it surprising that I argue for patience given my proclivity to do 20 trades per day -- but the concepts are not mutually exclusive.
The first of order of business is to actually have an accurate idea of what business you are in. As day traders we are in the business of trading noise. Sure I may have a bias about direction, but if i am good day trader that bias will be fleeting and my key focus will always be on price.
Investors trade time.
Traders trade price.
And that is why patience is vital for traders. Good traders dont just trade any price, but wait for key turning points during the day. That process often requires excruciating patience as level may be approached but not executed. Yet in the end that is the absolute key to success. If you are not patient you will inevitably get in trouble either chasing price or entering the position too soon.
It can feel frustrating to miss trade after trade and watch price go into the money, but trust me it is not half as painful as making a bad trade. Ultimately whether we day trade or invest we are always learning patience -- that’s why it’s such a dirty word in finance because it is the key skill that we must master and it’s hard.