When The Market Goes Quiet

Thursday, November 5th 2009 · Filed Under General
Tags: Market

Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.

Many new traders come to the Futures markets with very high expectations of making lots of money on a daily basis. This is understandable based on the reputation of the Futures markets.

Futures are known to be like the Wild West with excitement, volatility, instant wealth and the truth is that there are many days when a trader’s account equity will not change much at all or just stay in a normal range of normal ups and downs. Traders who use a particular strategy consistently and adhere to very strict money management rules will find that these types of account equity doldrums are quite common.

New traders are known for coming into the market and using a multitude of strategies and have little if any money management skills. In essence, they are just gambling. This type of trading account will see equity spikes both on the positive and negative side on a very regular basis, not a very good way to run a business.

During these quiet times while you are patiently waiting for a setup based on your trading plan, there may be market rallies/declines, major news events or even the “talking heads” calling for a major trend change, but you as a disciplined trader will wait for your signal. As you wait, watching the markets fluctuate on a daily basis will make you feel like you are missing so many opportunities. It is during these times of sitting on your hands and waiting for your setup that the frustration runs high and the urge to just place a trade becomes stronger and stronger. This is known as a boredom trade and I can tell you, they will almost all turn into losing trades. This is the market’s way of pulling in the weak hands to commit their money and then the strong hands reverse the market quickly causing all the scared sheep to run for the exits. During these quiet times is when you must adhere to your trading plan and not make a trade just because you have not made any money lately. When you created your trading plan, it was based on a back-tested strategy and good money management.

Patience and confidence will come from knowing that if you wait for your setup, your percentages greatly increase for having a winning trade. Confidence in your trading plan leads to patience waiting for your setups.