Monday, November 07, 2016

The Art Of Learning How To Not Trade

An insightful post from Dave Kelly asks the question, "Why is it so hard to be inactive?" in markets.  Many a trader I've known has traded very well and profitably, only to see those profits vanish through unnecessary trading.  They have trouble with patience, with the not-trading that is every bit as important to success as the trading of one's edges in markets.

But just as nature abhors a vacuum, people dislike boredom and non-activity.  There is always movement in markets and, out of a dislike of inactivity, it's easy to latch onto movement as a reason to trade.  That is why truly patient traders get away from their screens.  You can't feed the slot machine if you step off the casino floor.

Most importantly, I've never known a good trader who is inactive when he or she is not trading.  They are active in different ways.  They're consulting with colleagues and developing new ideas; they're researching new trading strategies; they're reviewing their performance and working on their goals--when they're not trading, they're either working on themselves, working on their trading, or working on their generation of trade ideas.  

Are elite athletes or chess players bored and inactive when they're not in competition?  Of course not.  They are practicing, working out, studying their opponents, preparing, preparing, preparing.  The question should not be, "How can we tolerate inactivity?", but rather, "How can we stay active in the right ways?"

There is much to be said for having work space away from one's screens.  There is also much to be said for counteracting activity bias with meditative discipline.  Illusions of control make us think that if we're active in markets, we're more likely to succeed.  The reality is that the activity of working on ourselves and our trading is the best way to sustain the right kind of activity in trading.

Further Reading:  What It Takes To Trade In The Zone