Patience Is Part of the Cycle

As a trader there are times where less is more and the art of patience becomes the ultimate strategy. It is counterintuitive for a trader to sit idle as it goes against the very nature of what a trader is and does, always on the prowl, always in motion, but during times of uncertainty it is that very patience which keeps a trader in the game awaiting the next favorable opportunity. I have struggled with this over the years and have spent considerable time analyzing why I am not alone facing this challenge. It seems that most traders have a drive to be in control, always attempting to influence the outcome of each and every situation. While it is this same desire to remain in control that allows many traders to achieve ultimate success as they don’t cling onto false hope, allowing trades to get away from them, it is this same trait which keeps a trader trading when in reality they should be doing nothing. It doesn’t look or feel right, raising substantial cash and taking your hands off the wheel, sitting back during a time such as we have now, but this is exactly the strategy which will allow you to weather the storm and be prepared to participate when the environment improves.

If position sizing is appropriate, while there will be nicks, the stops taken and the losses realized should not completely demolish a trader’s portfolio rather a normal draw will take place. Once the cash is raised, the trader should not recommit this capital until they are certain the environment has improved and the risk reward is much more favorable. Unfortunately, sitting idle can be a strategy that is necessary for weeks or even months. While there may be intermittent periods of opportunity, it may be a very long time before it is prudent to commit anything meaningful back into the marketplace. The question then becomes how does one know when the time is right? Well, first and foremost, the underlying charts will start to show signs of improvement and start offering a trader the patterns he or she favors. Once this takes place, a trader may wade into the opportunity with a very small amount "testing" the water and analyzing closely the movement and trading pattern of the stock. If the market has truly improved not only will these patterns start to act as a trader desires, but more patterns will develop within the underlying charts offering more and more opportunities. Themes will become apparent and specific groups of stocks will start trading better than others. It is at this point when one knows that the environment is improving and stocks can be added. As the environment continues to improve, more and more opportunities present themselves and very soon a trader finds himself with an abundance of opportunities and past challenges a distant memory. This is typically the time when a trader has to start become a bit more conservative and start becoming a bit more selective as the entire process will be repeated. As a trader it is inevitable that we will go through challenging times. Regardless of what anyone says it is also these times which will lead to the next great opportunities, but we must successfully navigate the rough spots in order to enjoy and participate when the environment improves. There are times when less is more and this is one of those times.Respect your stops, raise cash when stops are hit and sit idle waiting until the underlying chart action shapes up and we can start to nibble again. Patience is not easy but it will ultimately be what keeps you in the game for the long term.

Comments

Post a Comment

Popular posts from this blog

US Quake Test Goes “Horribly Wrong”, Leaves 500,000 Dead In Haiti

By: Sorcha Faal, and as reported to her Western Subscribers A grim report prepared by the Russian Northern Fleet for Prime Minister Putin is stating today that the catastrophic earthquake that has devastated the Island of Haiti was the ‘clear result’ of a United States Navy test of one of its ‘earthquake weapons’ planned to be used by the Americans upon the Persian Nation of Iran but had gone ‘horribly wrong’. The Northern Fleet has been monitoring US Naval movements and activities in the Caribbean since 2008 when the Americans announced their intention to re-establish their Forth Fleet that had been disbanded in 1950, and which was responded to by the Motherland when later that year a Russian flotilla led by nuclear powered cruiser Peter the Great began their first exercises in this region since the ending of the Cold War. Though virtually unknown to the American people, the use, and perfection, of earthquake weapon technology has a decade’s long history that began with the former Sov
Read more

I'm an accountant, I hate my job, but seriously, I wouldn’t know what else to do

I was born to be a lot of things, but being an accountant isn't one of them. In my heart of hearts I have always known this, but for some stupid subconscious reason, I have always ignored it. Why? Well...um...err...I didn’t know what else to do. How many people faced with the same predicament of deciding on a profession upon graduating used “not really knowing what to do” as their guiding compass? Blink. Ten years have passed and you’re left wondering, how did I get here? In this cubicle? Doing something I cannot stand (and I’m not even honestly good at), with people I quite frankly don’t really care about? For me that was accounting, a profession that conjures numerous clichés, such as boring, bean counting, personality not needed, number crunching etc etc. These have now evolved and have been replaced by repetition, reconciliations, long hours, fudging figures, high turnover, Enron and even more reconciliations. R-E-S-P-E-C-T But please don’t get me wrong, I have the utmost respe
Read more

Have We Reached a Top?

By James Kostohryz It's never been my position that the flow of fundamental news would turn from positive to negative overnight and in a total fashion. The world simply doesn't work that way. When I terminated my core long position a couple of weeks ago for reasons explained in�Ten Reasons the Countertrend Rally May Be Over,�I outlined a series of factors I believe may manifest in the later half of 2009 and the first half of 2010. Indeed, most of these factors will be more back-end loaded, as negative factors tend to build on one another and gain momentum in time through the medium of psychology and social mood. It's my view that the flow of economically relevant events�-- and perceptions of these events --are in the early stages of a transition. In this case, a transition means the flow of relatively good news will tend to wane somewhat while there's an uptick in relatively bad news. This is what one would expect at a top. However, it's to be expected that during t
Read more