Knowing When To Stay Out Of The Market
Trades won’t always be available: knowing when to stay out of the market.
EDGE: Sometimes there isn’t anything on watch, other times you can have 10 tickers on your watchlist but enter none because it doesn’t fit your edge. Your Edge. The market isn’t going to go the way YOU want it. You just need to sit back and trade your plan.
PSY: We have to make clear decisions based on our current mindset, trading capital and mental capital. Am I in a current drawdown or winning streak?
RISK: sitting on your hands can save you money. Making small shifts like using limit orders instead of market orders.
Sense of intuition when making decisions. This can happen for a small percentage of trades. For example, I was in a trade and saw that price action was forming a “top”. I took my profits and exited positions. The next morning, the price dropped. I can’t say it was a complete win and followed my rules. It comes with experience and time. It’s like that gut feeling.
Intuition - sometimes it’s better to just go with that feeling instead of what the market is showing to keep you in check psychologically. Less worrying about your position
“Intuition is a very real psychological process where the brain uses past experiences and cues from the self and the environment to make a decision. The decision happens so quickly that it doesn’t register on a conscious level.” - Leed University
It doesn’t mean you follow it blindly. It’s still important to use common sense and a balance of rationality.
It’s okay to be completely out of the markets. Once you accept that, you can avoid FOMO and take unnecessary trades/losses. It gives you a chance to self-evaluate your decision making when going into the markets.
Homework: Go over you last year's trades and look over the losses. If you were able to take away a quarter or half of the losses, where would your P/L stand?
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For education only. Nothing here is financial advice or a recommendation to trade any instrument. Futures trading carries substantial risk of loss and is not suitable for every investor. Past performance does not guarantee future results.