How and Why to Trade Patiently

Stories often impart a lesson much better than simply being told to do (or not do) something. Traders are often told to trade patiently: wait for the right setup, don’t exit your profitable trades too early, don’t trade if conditions aren’t right. Yet, often, we don’t seem to get the message. Maybe a story will help.

Trade Patiently, as Rushing Will be Your Demise…

17th century Ming painter Chou Young had an experience which changed his behavior forever. Coming across a river on a ferry, he had important books and papers to deliver to a city about a mile from the river bank. Night was approaching, and he became concerned he may not have time to reach the town before the gates were closed for the night. He had with him a young boy to help carry papers, and as the ferry made it across the river, Chou asked the boatman if there was enough time to carry the books and papers to the city before the gates closed? The boatman looked at the small boy, the clutter of books and papers, and responded: “Yes, if you do not walk too fast.”

Chou was puzzled, but he and boy began on their way. As it grew darker they quickened their pace, not wanting to be locked out. Soon, they were almost running, fearful and impatient. It was then the string holding the papers broke, scattering everywhere. It took much time for the papers to be collected, and by the time they reached the city gates, it was too late.

Be patient and you will get to where you want to be. If you rush your trades, or become impatient and do not wait for good trades, you will find yourself worse off than when you started. The irony is that we frequently want “action”…we want to do something, anything. But in trading, less is more. When we seek constant action, typically we end up with the kind we don’t want, where we are constantly fighting to get out of losing trades and trying to contain losses. If we only wait for the really great setups (and then pounce; once we see a great trade setup we can no longer hesitate), we may have to deal with a bit of boredom from trading lessons – Trade patientlytime to time, but at least we won’t have to battle against a plethora of impulsive trades which only serve to deplete our mental and monetary resources.

Taking your time to do things will give you more time, because you will spend less time fixing hastily made mistakes. Trading cannot be rushed. The market provides signals (based on our strategies) and determines when we trade. Our only goal should be to act when those signals appear. If we feel like we could be doing more to extract profit, then the actions we should be taking are research, strategy development, and testing. This is much more productive work than simply banging away at buy and sell buttons because we are impatient.