Many day traders struggle with patience, leading to unnecessary losses, increased psychological pressure, and wasted emotional energy. Day traders should wait until the setup is fully formed and the trade is activated before entering a position. If you find yourself entering trades too early, you need to adjust your strategy criteria so that you see more price bars before activating the trade.
Patience Affects Timing
Financial loss from buying before a price drop and selling before a price rise due to frustration or impatience is a terrible feeling. When this situation arises, traders often believe their timing is off or that they are out of sync with the market. While that may be true, a better outlook is simply a lack of patience.
How to Improve Patience and Timing
Most traders have a strategy they follow that tells them when and where to enter a trade. This strategy, if executed correctly, should lead to profit; otherwise, there’s no point in using it. However, traders face a problem: when watching a fast-moving chart in real time, the mind is tricked into thinking you must enter a trade before the setup is fully formed. You don’t want to miss a trade, so you enter the trade a little early and usually end up with a loss.
Wait until the setup is fully formed and the trade is activated. Activation should be a precise event that tells you when to act. Be prepared to miss a trade. Only take trades that give you a complete setup and activate your trade. No trades should occur unless they are activated by the market.
If you are following your strategy and still entering trades a little early, brainstorm what you can do differently. For example, if the price is trending upwards and starts to drop, consider waiting until the drop stops before looking to enter. Once the price starts moving sideways (during the drop), try to observe small signals indicating that the price may be starting to rise again.
If the sideways movement (consolidation) persists for several bars, monitoring the price to move above the highest price of the consolidation may help activate your trade. If the price is oscillating during the drop, try observing slightly higher peaks and higher lows in those small price movements within the drop.
Also, notice small movements that give clues that buying pressure may be increasing again. If the price tends to move in the opposite direction before moving in the direction you expect, wait for that deceptive movement to occur and then take action.
Be Prepared to Wait
Until you obtain several clues indicating that it’s time to enter the trade, don’t trade. You don’t need to catch every big price movement to be profitable. Be patient; the market often takes longer to move than we expect. If you miss a movement, you’ve missed it.
By waiting for the right setup and activating the trade, you will begin to capture more of those price movements you expect, and you won’t waste your money on losing trades resulting from impatience. To learn more about the risks of day trading, visit the FINRA website.
Adjust Your Criteria
If you are still entering trades too early, adjust your strategy criteria so that you see more price bars (tick bars, minute bars, five-minute bars, etc.). This forces you to be more patient, keeping you away from some of those losing trades that arise from impatience and getting you into more profitable trades. As a bonus, you will have less stress and frustration in your trading.
Source:
https://www.thebalancemoney.com/day-traders-improve-patience-to-improve-performance-1031426
Leave a Reply