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Learn to TradeTrading Strategies

How to Make Money from Staying Out of the Market

By Rob on March 7, 2014

Reading Time: 5 minutes

What if someone told you that staying out of the market could actually help make you money? It would probably sound pretty ridiculous, wouldn’t it? After all, to make money from trading, it makes perfect sense to actually trade – especially as you chose trading to make money.

Is Staying Out of the Market Pointless?

Wrong! Many people who attempt to trade financial markets for a living or as a hobby simply end up blowing their trading account, or if they’re lucky, decimating it by a thousand paper cuts over a longer period of time.

But why is this? Now, it may seem a little counter-intuitive but there are two major reasons which cause rookies to unwittingly subscribe to the mindset of an amateur trader and destroy their trading account.

Ever fearful of missing out of opportunities and “the move of the day”, they will:

  • Place too many trades They will typically spend hours glued to the screen in the hope of finding that trade. Whether it’s through boredom, frustration or anger, they will have a tendency to trade so-called “set-ups” which are not actually there – just like a mirage in a desert (Mirage in Desert Syndrome – MIDS).
  • Trade substandard set-upsEven if they have entertained the idea of adopting a trading strategy, they will likely deviate from it out of frustration if their strategy hasn’t given them an “excuse” to enter the market. Ever fearful of what they are missing out on from not having any trades running, they will kid themselves into taking low quality trades for the sake of being “in on the action”.

Does this sound familiar? Face it, most people have been there – even though many just won’t admit it. Why would they? After all, their ego is on the line! But you don’t have to join the long queue of losers by becoming one of these people.

It doesn’t have to be this way. Why become cannon-fodder in the market when you can transform your trading by emulating seasoned professionals in their approach.

Staying Out of The Market: Quality Over Quantity

Diamond MinerImagine profitable, stress-free trading as a result of spending far less time glued to the screen and fewer trades placed. For many-a-newbie, it’s a reality that is initially tricky to grasp, yet alone comprehend. But who can blame them? After all, the vast majority of people who try their hand in trading have come from a conventional 9-5 job in an agreement where they swap their time (office hours) for money (salary or wages). The more input hours they spend working will lead to increased pay and incentives. So, naturally there’s the prevailing mindset or, rather, misconception, that the more time spent in the act of trading and the more trades placed will lead to more money being made.

It will therefore come as little surprise that many amateur traders delude themselves into thinking that the more time spend in the act of trading and the more trades placed will ultimately make them more money. However, this is little more than a popular trading myth.

Staying Out of the Market Will Make You Money

Ever heard the expression: “It’s the trades that you don’t take will make you the money”? Well…you have now!

Guess what. It’s possible and many are successfully trading in this so-called Lazy Trader style.  Our trading approach to trading is epitomised by the taking quality trades over and above quantity – even if it means sitting on our hands and staying out of the game. Staying out of the market will be the only way to help you achieve this…if the conditions aren’t right.

Rules based Investing

It means that unless we have a trade-setup which fulfills all of the rules of our trading strategy and leaps out at us off the charts as an obvious looking trade, we couldn’t give a jot! Yes, we stay out of the market.

We just stay out of the market until we do get such an opportunity… even if it means staying clear for days or even weeks. Unless the conditions are right, what’s the point of exposing your capital to something which you hope is there but actually isn’t? There is no point!

DCF 1.0Unless we have an obviously looking trade-set up, we simply view the market as nothing more than random noise. Instead, we sit back and preserve our capital. Unknown to many people, this should be our number one objective – the second, of course, is to make money. However, a large percentage of people run amuck in the market, hell bent on making a quick buck…under the illusion that trading is “easy money”.

How Discipline Makes You Money

Any successful trader worth their salt will tell you that to be successful long-term in in the game, it’s as important to know when not to trade as it is to know what to trade and when to trade it.

There is absolutely no point in trading a set-up unless it’s one which ticks all boxes – a so-called “purple cow” trade. The kind of trade you would take in a heartbeat because it looks so darn obvious and you will have absolute conviction in the argument behind it…the kind of trade you will look back upon fondly in the future, perhaps wondering why all of the trades you took didn’t look this obvious and high in probability.

Lost and Confused SignpostSo placing “purple cow” trades setups which stand out, fulfil the rules of your strategy and you have faith in will stand you head-and-shoulders above the rest. You will therefore know what to trade and when. But when exactly do you know when to clear of the market? Simple! You stay clear of the market when you do not see a trade set-up based on your strategy’s rules for entry.  Yes, this is an inconvenient truth for many but it doesn’t have to be if you recognise the benefits of staying clear.

Emotions From Staying Out of the Market

  • Yes! Staying out of the market may feel unproductive and tiresome.
  • Yes! Staying out of the market may leave you feeling completely helpless and disempowered
  • Yes! Staying out of the market will probably make you feel that you’re not achieving a darn thing from not being in a trade.
  • Yes! Staying out of the market will probably cause you to think: “This is not what I signed up to!”

Does that sound about right? If so, then you should not feel this way!  We need to tweak our mindset here by reframing staying out of the market as an opportunity to preserve capital.

In fact, it’s essential that we do! The above emotions typically felt from staying out of the market represents the mindset of the amateur, whereas we want to emulate how professional traders think in addition to trading a successful strategy.

A seasoned professional will simple treat a market which is completely devoid of any legitimate trade-set ups as a fantastic opportunity to save their capital. The amateur will resent it while the professional will celebrate it.

The professional trader will demonstrate discipline by staying out of the market before enjoying a holiday from chart gazing with their trading capital preserved for those opportunities “purple cow” trading opportunities that really do look obvious.


Imagine the amount of money you will have made from not taking trades on impulse or boredom from simply staying out of the market.If in doubt – stay out.

If a trade set-up doesn’t add up, then don’t trade it. Accept not having the “green-light” to be in the market as positive opportunity to preserve your capital and enjoy some time off rather than a hindrance to your trading endeavours. Trading is one of the few vehicles available which can enable you to get more profit potential from doing less. Suffice to say, less is more – and more is less. The quality of the trade will always take precedence over and above the quantity placed.

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The Lazy Trader is a publishing brand dedicated putting the fun back into finance, presenting powerful wealth creation strategies for a better world.


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The Lazy Trader is a publishing brand dedicated putting the fun back into finance, presenting powerful wealth creation strategies for a better world.

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