To Take No Action is an Action

[PristineTrading 10]

Good Morning All;

 

Today's title is an old proverb from eastern culture. It is also an important realization for many developing traders as they progress through the trading ranks. There are two common problems for developing traders. First is a lack of patience. Second is not having the ability to know when doing 'nothing' is the correct, best, and most profitable option.

 

To Take No Action is an Action

 

These problems can show up in two very measurable ways, both of which are common to new and seasoned traders alike. First, traders with the above problems will overtrade. The lack of patience causes them to take a trade before it has developed properly, or to take a trade that was not even in the plan at all. Many traders feel the need to be doing 'something' to put their skills to use. Many fail to understand that sometimes that 'something' should be waiting for the next real opportunity.

 

What is the definition of overtrading? Five trades in a day? How about 20 or 50 or 80? What if you swing trade? The answer is that the definition of over trading is not a number; it is trading more than what your plan allows. You could take twenty trades and not be over trading; you could take one trade and be guilty.

 

Second, traders with the above problems will have a tendency to exit trades early without good reason. How many times have you exited a good trade for partial profits, and watched from the sidelines as the trade went on to its original target? Or, worse yet, re-entered at a poorly planned entry and stopped out? Traders who have the need to do 'something' all the time often over manage trades. When they look back, they often had no reason to exit, but may not see this as a problem because they were 'managing' the trade.

 

Closing Comments

 

There are three things that will help. First, just accept the title of this article. The decision to stand aside IS a pro-active decision. Second, a well-laid trading plan will give the foundation to your trading to stop making decisions from 'boredom'. Third, just ask yourself this question. Am I buying or selling here because this is the proper action based on my plan, or am I just looking for something to do? Taking a lesser quality trade just to trade is the mark of a novice...

 

Paul Lange

Vice President of Services

Pristine Capital Holdings, Inc.

[fast 10]

To Take No Action is an Action

I certainly don't mean to suggest that you have not made some good points in your opening post, and if you hold the belief that the decision to take no action is an option, I would most certainly be inclined to agree, but the quote above which is also a copy of the thread title is not only a contradiction but an obvious contradiction.

 

Nonaction is the opposite of an action. If I decide to buy and act on that decision, or if I decide to sell and act on that decision, then either way, I have made a decision and acted on it; however, an action is not a consequence of a decision to neither buy nor sell, even though the choice to neither buy nor sell is an option. Doing nothing isn't something we do, as it's the same as not doing anything.

 

Of course, none of that should be taken as if to dismiss your underlying point which is that taking no action is an option.