Saturday, December 24, 2016

The Power of Doing Nothing

In trading, doing nothing is often the most difficult doing.  A bias toward activity gives us an illusory sense of control, when in fact we often exercise the greatest control when we are not doing.  Not trading enables us to see the market unfold in its own time, in its own way.  After a while, we perceive meaning in the action:  new buying or selling leads to a break out of a range and a new trend; the failure of buyers or sellers to generate new lows leads to a move back into a range.  We are best equipped to perceive the meaning of market activity when we are not burdened with our own position, our own views.  A flat position makes for an open mind.

Can you imagine a psychologist who started gabbing away from the very start of a session with a client?  That would most likely be an ineffective (and obnoxious) shrink.  No, the skilled psychologist begins by saying little.  The skilled psychologist listens and asks questions and listens some more.  Eventually a pattern emerges:  the person's experience begins to make sense.  Once a psychologist and client can identify a pattern that sets up in a variety of life situations, they have the opportunity to intervene in that pattern, interrupt it, and redirect it.  It's impossible to take meaningful action unless there is meaning that you perceive, guiding your action.  That requires listening before acting.

It's the same for physicians.  No doctor begins an office visit by offering medications and procedures.  Instead, the physician listens to the patient's symptoms, takes a history, conducts a physical, and runs tests before contemplating any action.  No diagnosis, no treatment: it's necessary to perceive meaningful patterns in symptoms and test results before conducting any kind of intervention.  Understanding precedes effective action.

The skilled actor recognizes that not doing anything opens the door to conveying mood and feeling.  Clint Eastwood conveys a great deal with a single facial expression.  Not doing permits a different kind of doing.  Too many traders act before they truly understand: they are more interested in trading than in making sense of markets.  Markets tell a story.  We can apprehend their meaning, if only we stop doing and start listening.

Further Reading:  Listening to the Flow of Market Conversation