By Rob Colville on December 19, 2014 in
As the saying goes, “Patience is a virtue,” and indeed, patient trading is a skill that many strive to develop. And, when it comes down to functions like qualifying trade set-ups and letting profits run, patient trading truly does pay off.
But did you know that there are at least two distinct times when it actually pays more for traders to be impatient? Times when quick reactions and snap judgments are smart moves, and times when the best traders will simply throw all patience out the window?
It’s true that despite all the talk about patient trading, there are also times when traders should be notoriously impatient with their trades, set-ups, and even broader strategies. So with that in mind, here are the times when patient trading pays off, and at least a couple times when it absolutely does not.
You want for calm, calculated, and patient trading to be your baseline, and the state in which you trade most often. You want to approach each day’s session that way, and carefully execute your strategy whether it causes to you take a trade that day or not, for that is quite possibly the best and broadest definition there is of “patient trading.”
Trade Selection: Experienced traders never force trades or take unqualified set-ups, and instead will wait patiently for as long as it takes for valid set-ups and signals to appear before committing even a drop of hard-earned capital. All told, patient trading and discipline is a lethal combination that separates successful traders from those who struggle and/or eventually fail.
Trade Management: Patient trading also pays off whenever a winning trade is in progress, although, ironically enough, this is a time when new or inexperienced traders often become fearful or impatient and wind up exiting too early. Be patient with winners as they are happening, use defined targets and proper risk controls, and let profits run whenever you find yourself on the right side of a trade.
Performance Analysis/P&L: Patience must also prevail when it comes to virtually all things money, because while profits and bottom-line financial results are why we ultimately trade, our success is determined through the course of a career, not on a trade-by-trade, monthly, or even yearly basis. Stay patient, generate small-but-consistent wins, and as the sample size increases, so, too, will your profits.
For all the conventional wisdom out there about patient trading, one may get lulled into being too deliberate and methodical, but don’t be fooled; quick and decisive choices are vital for traders in all markets, and even on the higher time frames! Especially when it comes time to execute your trades, practically nothing good can come from waiting around. And, likewise, there are a couple other instances when traders should act immediately and without so much as a second thought.
Exiting Losing Trades: Successful traders are always patient with winning trades, but are notoriously impatient with losing ones. For newbies and inexperienced traders, though, the opposite is often true. Some even think that’s the secret to profitable trading, and it may well be. So make sure not to stay patient in the midst of losing trades, and whatever you do, don’t add to losing positions or move your stop to give a loser more time and space to “turn around” for you.
Underperforming Set-ups/Strategies: There are a million strategies, set-ups, and indicators that can be used to trade any market there is, and truthfully, it doesn’t really matter which ones you choose! Trading is ultimately about doing more of what works, and less of what doesn’t, so be impatient when it comes to losing methods or set-ups. Consult your trade journal to consistently analyze what’s working for you, and identify what isn’t. Those are the items you either work to refine, or abandon altogether, as this is yet another time when patient trading just won’t pay off!
“Be a patient trader,” they say. Stay calm regardless of market conditions, and let the inevitable losing trades “roll off your back,” they say. Then, provided you’ve planned and executed in accordance with your strategy, simply accept the results as they come. Sounds like good advice, right?
Well, it is, for the most part, but our mission here was to identify the times when being a patient trader can actually be detrimental. In trading, there are some things that you shouldn’t “simply accept,” and some outcomes that you just can’t afford to let “roll off your back.” Think about these times, and even as you strive to become a more patient trader, never lose sight of when it actually pays to be an impatient one.