- Market Opportunities
- Gaining Experience
- Risk Control
Market Opportunities
Overtrading can be detrimental
Inexperienced traders feel that to make large profits, any moment not spent involved in the market is a wasted moment. They are afraid of missing the next big market move, so they must hold a position as often as possible. More experienced traders think in exactly opposite terms. They ask themselves before every single trade the following question:
These traders instead assess the market carefully to determine ideal opportunities to open positions. They realize that each time they enter the market they are exposing themselves to risk. Once these traders have entered a position, they closely monitor the market.
Markets do not always have a definite trend
On average, the markets can be considered in a definitive trend only about a third of the time. The other two thirds of the time the market is moving sideways or considered range-bound market. Does that mean a trader should only be involved in the market a third of the time? For pure trend traders, the answer is "yes, a third of the time at the most". Regardless of the trading style, there are bound to be many hours that traders will spend idle. If the trader has made a significant investment in the pursuit of trading success, then the idea of sitting inactive at the trading desk might be disturbing at first but is often a necessary condition of success.
The majority of time is spent in preparation
Most aspiring traders envision the life of a professional trader as a constant, non-stop, action-packed ride. On the contrary, professional traders spend most of their days on market research, reviewing old trades, setting up new trades, or just simply watching the market. Only 5-10% of the time will a professional trader actually have a position working in the market.
