Tuesday, November 18, 2008

Know When Not to Trade... Know Yourself

The past several weeks have been frustrating as a trader, to say the least. All traders spend their time analyzing the market so that when an opportunity presents itself, they are ready to capitalize. In the current market conditions, however, there are not too many opportunities. Over the last several months I have kept track of possible set ups and trades that have presented themselves. The problem has been that they seem to be few and even those that do present an opportunity may have one second guessing it's validity. Chris warned of this thin liquidity months ahead, but I don't think even he thought it would continue for this long. Not only are we in very thin markets but we are seeing a global shift in the market place. Nearly all the pairs have doubled their ATR's and levels that once was a confident play have become a roll of the dice it seems. As I said, I have tracked trades on this site and proved that price does it's thing over and over, but because of the current conditions I find myself cutting trades much too early. My account growth has slowed and most times I don't even want to look at the market, much less trade it. Am I losing my passion for this business? I don't believe that is the case. I truly think that I have finally tapped into the mental state that a trader must have to finally see true success. I find myself looking at the market and thinking of placing a trade but feel more comfortable than ever staying on the side lines, even through the frustration. Most times I watch price action and can fold my hands without feeling the need to take a trade. I don't like what I am seeing, therefore it does not entice me into the market. Of course I am still progressing and probably always will need to be on guard for that dice roller that use to be present inside of me. There have been a few times, although they don't happen that often any more, that I have felt a temptation to jump into the market. One such time was when the interest rate decision came from the Bank of England. They dropped interest rates much more than expected and I saw the pair start to dramatically drop. After a close below a key low, I was watching for the retest and was licking my chops. After the retest I thought about entering the trade short, but THEN....I considered the risk and walked away from my pc. I felt proud of myself. I was in a situation that in the past might have lured me in. The announcement sure appeared to be in my favor, but after that drop, it did the opposite of what I expected. When I checked the charts later in the day, it had gone up another 100 pips and I would have lost the trade. Looking on that situation and a few others like it where I did not enter the market, I have come to the conclusion that I did not make the choices that I use to make because I focused on the risk more than the reward. I have been saying something that maybe I have written in the blog before or someone else has actually said, I don't know, but it's true none the less....expect to win but prepare to lose. When I "prepare" myself to possibly lose a trade, I am finding certain trades become less and less appealing. I find myself not wanting to be in the market as much. I do not frown upon other traders who may enjoy being in the market a lot and scalping for pips, as long as they use risk and trade management. That is the ultimate key. But for me, right now I am content to stay on the sidelines and wait for the next good opportunity...whenever that might be, and even then I may just remain a spectator. One day the market will return to some resemblance of order but until then I must do the opposite of what all the leveraged traders have done and protect my account to trade another day, week, month, or however long it takes.