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The Most Overlooked Trading Skill is … Impatience
My partner who hit something like 44 out of 50 winning trade calls is a perfectionist who is never satisfied. This week she managed to bang out three winners in a row in everything from GBP/CAD to USD/JPY but still vented to me about how she cashed out too early as we watched some of the positions move higher.
Since I only day trade, my job during those conversations is never to offer my personal views but to basically be her therapist, keep her mind focused on the next trade and most importantly never, ever let her think that she should change her ways. While K deserves complete credit for her brilliant fundamental calls this year, I take a small measure of pride in knowing that my emphasis on posture and tactics helped guide her positional ideas to profit so many times over the past few months.
That’s because as someone who trades price action rather than fundamental themes, I have learned the very hard way that patience in trading is as much a vice as virtue. After thousands of trades and years of screen watching I have concluded that there is only two way to make money in the markets.
You can be patient with your entries or you can be patient with your exits -- but you can’t be both.
As a day trader I let price come to me. Indeed everything I do revolves around being patient about price entry. The more selective I am the better I trade. This is a lesson so burned into my mind by market experience that I literally never question it anymore. Do I miss out on profitable trades? Absolutely. Does it matter? Not at all. I can miss out on 10 great trades ideas, but as long as I avoid a big loser I am way ahead. Like an insurance company I would rather pass up on underwriting a group of healthy men if I can avoid insuring someone in that cohort who contracts an incurable disease.
Which brings me to impatience. It’s one of the most overlooked skills in trading. How many times have you been in a trade and something just didn’t seem right? It didn’t move your way or only moved partially and stalled or moved against you then came back to small profit and just hung there. Nine out of ten times you probably let the idiotic belief in “patience” override your instincts. And maybe, just maybe you were proven right, Holding that position ultimately proved profitable.
There was one time when you could have gotten out even or at a small loss, but instead you held on and BOOM! You lost all your money. That’s right. Many times the market actually punishes rather rewards patience. In fact here is a thought for you -- EVERY SINGLE MARGIN CALL EVER MADE IS A RESULT OF “BEING PATIENT”.
So in my old age I’ve learned to wait and let them come to me and then once they do I’ve learned to let them go quickly -- win, lose or draw. In fact in studying my trade data I know that 80% of my winning trades resolve within 1 hour. If I am still holding inventory past that time my only thought is get the f- out, profits be damned. Does that mean that I often have to make 3 trades to make as many pips as other traders in my room make in one? Yes. But it also means that I am flat and able to look for the next idea while they are nursing repairs that could quickly turn into nasty losers.
So what does this have to do with K? Well just like my day trading tactics I have helped her develop an appreciation for letting the price come to her and once it does, to consider booking profits even if there is more meat on the bone. All those trade ideas she beat herself up about this week? They turned into losers 24 hours after we got out of them.