Staying Out of The Market is a Position

The value in not trading….is not losing!
 
First off, everyone needs to understand why being flat the market can actually be a LUCRATIVE position…
Let’s say your account value sits at $5,000. Market conditions are really choppy and have been for about a week now, but you REALLY feel an URGE to trade. So, you end up trading some inside bar setup in the middle of chop on the 4hr chart that you rationalize out to be an acceptable trade setup. You lose $150 on the trade as the market quickly reverses and goes against you due to the current choppy conditions.

Your account now sits at $4,850 because you traded when you KNEW you shouldn’t have. There is nothing wrong with taking a valid and confluent setup. But, when you start taking less-than-obvious trades, just because you have an emotional urge to be in the market, you are playing with fire.

Now, think about that $150 you lost like this….if you had done what you knew was best by not trading because there was no obvious setup, you would still have that $150. So, essentially, since your trading account at $5,000 is more valuable than it is at $4,850, by simply NOT trading you are in a more lucrative position than if you lost that money. It seems a little obvious I know, but the point is that you need to start thinking about not trading as a lucrative position, as compared to a losing trade. If you lose on a setup that you knew you shouldn’t have taken, you are putting yourself that much further away from achieving your goals.

Let me clarify, you WILL have losses, even when taking A+ price action setups, it’s just part of the game. But if you are consistently losing mainly because you are not waiting for setups that almost scream at you to trade them, you are either not following a pre-defined trading plan, trading emotionally, or both.
Also, don’t be too hard on yourself for “missing” a good price action setup. There market will be here tomorrow, and more opportunities will arise. Your main goal is to not lose money, if you focus primarily on not losing money through not over-trading or over-leveraging, the money will eventually come. Most traders put themselves far behind the curve by trading too much and not picking only obvious setups.

· Trade ONLY perfect setups…

I know what you are thinking right now, “But , how do I know if it’s a perfect setup?” Well, in short, you don’t. But if you truly master everything I teach in this members’ area, you will KNOW what you are looking for. You can then use this information to build a comprehensive Forex trading plan and track everything in a Forex trading journal. See the link to the journal I gave away in a recent article on the free side.

There really is no such thing as a “perfect” setup, because ANY setup can fail. So, all you can do is really master your chosen trading strategy (price action) while keeping in mind you still have to manage your risk on EVERY SINGLE trade because even trades that look like a picture in my trading course might not work out.

The point of all of this is this: as long as you feel like you have 100% mastered everything I teach here, and you have turned that information into a trading plan and a created a trading journal that you follow to the T and update with passion and urgency, you are doing the things that lead to success in the markets.

There is no sure way to make money in the markets. But if you do what I discussed above, you will be able to put the odds of consistent monthly / weekly profits in your favor. And always remember, when in doubt stay out. There should be NO DOUBT before you enter a trade. This comes from knowing what you are looking for and not risking too much. If you don’t know 100% what you are looking for, or you risk too much, you will experience fear and apprehension, and these two things usually lead to emotional and inconsistent trading.