As the saying goes, “Patience is a virtue.” When it comes to investing, this is especially true. But although even the best traders and investors understand how important patience is, very few have mastered the skill. Patience in trading is a disciplined art and must be practiced intensively before it becomes automatic.
Whether it’s with stocks, commodities or Forex, holding back from a knee-jerk reaction to trading is difficult to do. Logic takes a back seat to our emotions and we end up making a quick, often non-judicious, decision. Reigning in our need for quick results is an acquired talent.
Here’s what usually happens: As a trader, you’ve done your due diligence, sought out the best Forex broker and opened an account. Intellectually, you choose the direction in which the currency pair will move, (based on a gut feeling?) and wait. The price starts to move in the opposite direction and you start to panic. You place an order below your planned entry point in a rush to make sure you don't miss the trade. You’ve now diminished some of your potential profit. More importantly, you have broken the rules that caused you to enter the trade in the first place.
Letting your emotions take over your decisions can be very dangerous in the long run. Emotions can be seen as the trader's worst enemies; they often lead to misjudgment and loss. Learning how to stand back, take time to analyze the situation and then move forward is always the prudent thing to do. Setting yourself rules and keeping to them is a way of holding the emotional side of trading at bay.
Trading Opportunities
When it comes to trading, keep in mind that there are always many trading opportunities in the market; the difficulty is not so much in finding trading opportunities, but making sure the opportunities fit your trading rules. Since 80% of all Forex trades end in a loss, the chances losing your money far outweigh those of coming out ahead.
Learning to use financial graphs and Forex indicators can be beneficial in training yourself in trading patience. Taking the time to read the graphs properly and interpret the indicators provides you with an emotional brake and offers a short interval between the time you make your decision to move and actually placing the trade.
Patience in trading is also needed after you have placed the trade. If the price moves in the direction anticipated, you must then choose whether to sell and take a small profit or wait till the price moves even higher. Small profit vs. large profit or possible loss. If you wait too long, the price could start to move in the wrong direction and you will lose. If you act too hastily and sell, you haven’t given yourself the chance for the price to move back up.
Again, this is where your set of trading rules comes into play. If you decided beforehand that your will be satisfied with a small profit, then you will move to sell once the price moves even slightly in the anticipated direction. If you have decided to sit out the trade till it reaches the highest price, then you can stay firm in your trade and wait it out. If it keeps going up and you sell, you have profited; if it turns around, you can lose all your money.
If you follow your own goals and strategies, then you will have more patience in trading than if you set yourself up without any guidelines. Practicing patience in trading reduces your stress, removes unexpected surprises and makes Forex trading a lot more fun.
Patience in Forex Trading- Video Script:
"Welcome to Daily Forex! Today we are going to be looking at- Patience, as a trading virtue!
Just jump in!
Patience: as a trading virtue.
Oh this is a big, no HUGE part of trading!
You ought to remember, when you come into market, it’s not about trying to make money fast. It’s a marathon, not a sprint. So sometimes you do generally have to sit on your hands and wait for your strategy to show you an opportunity to enter the market.
You don’t always need to be active in a market, or have a live position going. It sometimes requires an element of being patient and waiting for that opportunity to appear.
Emotion:
This is also a huge factor as well. So let’s say this scenario: You come in, you’ve placed your first couple of trades of the day- (and bear in mind this is in line with your trading strategy-) and they make LOSSES!
Sometimes traders can fall into a bit of a negative mentality. So they made those losses and they think- “I need to make those losses back. Let me jump away from my trading strategy and find another opportunity quickly NOW to make this money back!” But in fact you just need to be patient, and remember , with your trading strategy, you’re not going to have a 100% win rate. It’s just not feasible and possible at all. You have to remain patient and have faith in your strategy and that’s going to produce another opportunity for you and that you will essentially get back on the path of gains. You just have to remain patient, and deal with that emotion as well if you have made losses initially.
Know when to step away from the trading.
You have to remember- there may not be an opportunity present at every time - As I was explaining, you don’t need to feel the need to always be in the market. it may be too volatile for your trading strategy to trade right now. Or there may not be enough volatility or liquidity in the market going for you. So maybe just step away and re-evaluate when the market conditions are suitable for your trading strategy. And another situation- perhaps just set and forget as well. Once you set your trade in line with your strategy, you’ve placed your stop, or your target profit, step away again! Let the market do it’s thing and have faith in your strategy, and remain patient!
So thank you from DailyForex. Hope it’s given you a good insight into patience as a virtue with trading. Please don’f forget to download the DailyForex app for all the latest market analysis and educational videos. Thank you!"