What does trading psychology say about being frustrated? Here's the scenario: you've been sitting on the sidelines while watching the market rally 50% off the March lows. Are you itching to jump in and buy? Are you frustrated because you are missing profits?
Many traders I've been talking to feel this way at the moment. They have watched the market rally and they are not on board. And, it's not just the swing trader who feels this way. Many times, day traders are confronted with a narrow, flat market or even a trending market that offers little entry opportunity.
That happened to me this morning as I was coaching a group of traders in the S&Ps. The market was moving, but there were just no entries. Sitting on your hands can be one of the most difficult things a trader needs to learn. We often feel unproductive. After all, we are traders; we are supposed to trade!
Redefining Ourselves as Traders
Well, not really. We are traders and we are looking for edges to trade. When an edge shows up, then we trade -- and that's a big difference. The trader who has adopted this mentality is much less likely to force trades out of boredom or because he/she feels an internal pressure to be productive. The trader who defines his/her job function as finding edges to trade is in a better position to avoid frustration trades. It is an important part of what makes successful traders successful.
OK, so now we have clarity on our function, but it still can be frustrating. It still can feel quite unproductive to sit on our hands all day. True enough.
How to Be Productive So, what can you do when you can't find an edge? How can you be productive? There are many things you can do when the markets aren't offering opportunities. Here are five practical ideas you can do to avoid the frustration and be productive:
1. Learn a new aspect of trading. Maybe you have wanted to learn more about trading options ratio spreads, or perhaps that book on Market Profile is sitting on your shelf unread and gathering dust. Dust off that book and read a chapter. Search the internet for information on ratio spreads and put a file together to study.
2. Do some market research. Maybe you have an idea about market behavior that you want to assess. A down time in the market can be a good time to do research.
3. Do some simulated trading. Focus on a particular setup and paper trade it on a simulator. Study it carefully in simulation and you will "own it" as a setup in real time.
4. Review your trading plan. Trading plans can always be improved. Take a section of your plan and think carefully about how you can improve it, and then do.
5. Annotate charts. Pick out model examples of trades and mark your charts carefully, highlighting all the reasons this was a sound trade. This has you think carefully about the trade and you will no doubt come away with greater insights.
Keeping yourself from becoming frustrated and taking poorly defined trades can be a simple matter of how you define yourself as a trader and shifting your attention to productive activities when needed. You can keep a chart open to the side of your screen and keep an eye on the market If an edge sets up, you can trade it. Otherwise, you can engage in another productive activity as you 'sit on your hands.'
One other thing you can do while sitting on your hands is to keep current with advances in the field of trading psychology. You are invited to visit Dr. Gary's blog where cutting edge research and techniques to develop your skills are discussed: http://www.tradingpsychologyedge.com/12.html?sm=82688
Article Source: http://EzineArticles.com/?expert=Gary_Dayton,_Psy._D.
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