To trade well is not to trade is a very famous Zen proverb (which I just made up).
Some of the best traders I have known did not trade for 17 out of 20 trading days a month. And in the three or so days they did, they made a killing.
Why should you not trade most of the time?
- Most of the time, nothing happens in the market. Things happen in quick bursts sporadically. Ideally, you should enter these bursts, ride the waves, and get out.
- Most of the trade ideas are sucky. You think of 100 ideas, 50 are outright wrong, another 40 have bad risk-reward, 7 of them will be okay-ish, and 3 will be spectacular. You have to wait for those 3. It is like Poker. Exactly like Poker. Some hands are good, some are marginal, some are outright bad. When you are playing a 9 handed, if you keep betting or matching blinds on any rag hand you get, you will surely bleed to death. And if you play flop, turn and river with bad hands, you will go bust. You have to wait for those great hands to enter. If you still didn’t get it, think dating ;)
- At any point in time, you have to be able to spot the best opportunity and have capital free to trade that. If you are invested in a trade, you cannot use that capital to do another trade. And sometimes, these other trades will be far better.
- Let us admit it. Trading is mental stress. No one wants to be mentally stressed all the time. And nothing sucks like chronic stress. It is better to get into the high stakes trade zone for a short time, give your mind enough time to recover, and then go back to trading. So take a short-time trade, make some money, close out your positions, and enjoy life!
Remember, not having a position is a position. To not trade is not a passive act. It is an active deliberate decision you made, to preserve your capital.
This is part of an initiative by Sensibull — India’s First Options Trading Platform to make the retail investors in India profitable. You can read many more insights on trading psychology, discipline, better trading advice, bet sizing, risk management etc on Sensibull Manifesto.
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