Sometimes, No Trade is the Best Trade

By November 17, 2017Trader Tips
Sometimes, No Trade is the Best Trade

No Trade is the Best Trade

You’re still a trader, even if you decide not to trade today.

There’s not always a perfect set-up and there’s no need to force the issue all the time. Sometimes it’s just not a trading day and we have to accept that.

Download a PDF version of this post as PDF.

Always consider the psychological aspect of each trade you make or each trade you examine every day. Always ask these key questions:

  • What kind of day am I having?
  • Is this a perfect set-up, or am I just dying to make a trade?
  • Do I feel any pressure from my peers to make a trade because the chatrooms are lighting up and everyone’s so eager?

There’s a common ‘statistic’ being throw around the online media that 95% of traders fail, leaving only a paltry 5% who can actually make a living out of it. Well, there’s probably only a shaky basis for these so-called statistics, but certainly many traders fail. They fail for a number of reasons:

  • They don’t do their homework
  • They don’t have a strategy
  • They don’t have a plan for each and every trade (when to enter, when to exit to minimize losses)
  • They become addicted (and then blinded by addiction, which leads to irrational trades)
  • They get greedy (same as above)
  • They miss the mark on the timing of a trade, and then let fear bog them down
  • They feel pressure to trade all the time, even when there’s nothing good to trade

Sometimes it’s better just to take a break. You know when a set-up isn’t perfect, so don’t push your luck. Because if you force a trade, then it’s pure luck that will have to carry you though, and we luck isn’t exactly a sustainable science.

Take a page from the book of STT lead trainer, Tim Bohen, who knows when to trade and when not to trade.

Every day, he writes down his detailed plans for each stock he’s got on his watchlist. This plan includes his decision for an entry point. Some days, those entry points just don’t materialize. They never reach what he’s written down in his plan as his entry point. And if it’s not in the plan, it’s not going to happen because Tim knows that without a plan, trades fail. Never betray the plan.

“If you force a trade on those days, you will almost certainly lose,” says Tim, “and then you’ll be angry with yourself for succumbing to the weakness that allowed you to force the trade in the first place.”

It’s kind of like shoe shopping. If you set out for a specific pair of shoes and don’t find anything you like, you don’t (or shouldn’t) just buy any old pair just to say you bought some shoes.

You will live to shop another day. The same is true in our present scenario: You will live to trade another day. And many other days beyond that.

There’s a great book to read on this subject by Jack Schwager called Market Wizard. Schwager discusses, at length, the concept of doing nothing as a key component of investing successfully when conditions are unfavorable, or when you can’t identify a good opportunity for trading.

Suffice it to say, this fund manager and an industry expert obviously agrees with Tim.

Doing nothing requires a fair amount of patience. It’s hard to fight the urge, but a good trader knows how to combat it and minimize his exposure to losing trades and bad set-ups. 

That feeling you get that you’re missing out on something is real—but what you’re likely missing out on is a loss. Don’t try to fight the market, because the market always wins.

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Join the discussion 10 Comments

  • Peter says:

    Good advice

  • Jeff Weaver says:

    So true, I tried to force my first two trades(ever!) this week. I took small losses on both! Thankfully the stocks held support and the losses are very minimal; I only took small positions because I consider myself on a “learners permit”. Stocks are like riding a motorcycle if you don’t have the experience, getting behind the wheel is always risky.

    If you have a small margin don’t risk forcing a trade because you have a ‘hunch’, ‘feeling’ or you ‘think’ the stock is moving in the direction you want. Learn the patterns, the setups and how to properly anticipate the direction a stock will move in your favour before diving in.

  • sue says:

    YEs so true. I have missed my entry so many times I can’t count. I need to reevaluate my plan better and see what I am doing wrong. STT had gone down so many times at the opening of the market when I was going to make a trade and lost where the price was so I didn’t get in. Tim Bohen is the greatest with his podcast and pro trader even though I am not part of it. Thanks Sue

  • Claudia says:

    Very helpful article. Thank you!

  • Eli COHEN says:

    Fully AGREE!

  • Andrew says:

    That’s true and it’s nice to read that I’m not the only one having those issues! Thanks for sharing!

  • Roger says:

    How true this is!!! kiss is the way to do this.

  • Jermaine Russell says:

    I learned that over trading is never a good idea. Only trade the best setups. Thank you for the reminder as I was looking for an overnight spike on FOLD. Might have forced a trade there. Still trading considerably less than bfore tho. Thank you Tim

  • Dustin says:

    Initially I suffered from this, feeling like I needed to trade because I could and didn’t want to miss out. Many small losses. Not any more!!!! I never thought I could be so patient lol

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