There is a common perception that traders are constantly in motion and always have some trade in place. The reality is that the best traders have developed the skill of staying patient and doing little while they wait for the right conditions to develop. Once the right setup triggers, then they move aggressively and with conviction.
This ability to shift from patience to aggressive action is very powerful and useful, but it is not an easy skill to master when there is this nagging feeling that you are going to miss out if you don't do something.
The current environment is a good example of where it may be advantageous to do nothing. The indexes are mixed, breadth is just slightly positive, and there are very few pockets of momentum. The market is basically on hold while we await news events later this week.
Some traders like to bet on the outcome of major events. They predict what the news will be and how the market will react to it and then try to position to profit if they are right. Many traders feel that is what they should be doing.
However, good trading does not require predicting news events and reactions. Traders can do extremely well waiting for the news to hit and then trading the volatility that follows. You may miss a gap in one direction or the other when there is surprising news, but the majority of the time, there are big swings, and those can be traded with a much lower level of risk.
I'm following my own advice Monday morning and am not doing much at all. I don't feel like I have to rush to buy right now, and I see no reason to sell longer-term holdings that I still like. I will be ready to move when we have material news, but that is not going to happen today.
"Trading" - Google News
July 25, 2022 at 10:40PM
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Doing Nothing Is an Underrated Trading Strategy - RealMoney
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