Introduction
As day traders, we live a fast-paced life where we are required to make split second decisions that can have significant consequences, some that work out in our favour and some that don’t. One of the biggest fallacies in trading is that most beginner traders are drawn to the potential of quick profits, which leads them to prioritise immediate gains over the art of patience. In contrast to this, a professional trader knows that when it comes to the markets, patience is not just a virtue, but a powerful tool that can be used to transform the way we approach the markets. In this blog post we are going to explore how embracing the journey of trading, rather than just fixating on the destination, is the ONLY way to lead a successful trading career. That is the Power of Patience!
Quick profits is just an illusion
Like I said, most beginner traders are drawn to quick profits, and they can’t resist the thrills of possibly making a significant amount of money in a matter of minutes. But it is these same urges that can unfortunately cloud their judgement, forcing them to completely disregard any kind risk management rules. It is this fixation on instant gratification that causes so many traders to make irrational and impulsive decisions, which ultimately leads to losses, frustration, and a very short-lived trading career.
“The market is a device for transferring money from the impatient to the patient.” Warren Buffet
It is true that the volatility of the markets presents a lot of opportunities for traders. However, focusing on the short term gains, and neglecting the long-term goals and objectives is one of the worst things you could do for your trading career. A professional trader on the other hand, knows that trading is a marathon, not a sprint. They recognise the importance of staying patient and staying focused on the bigger picture, because they know that quick profits is just an illusion.
Fear Of Missing Out (FOMO)
Trading psychology is a huge subject which covers so many different areas, but one of the biggest aspects of this subject is the topic of patience, and more specifically the Fear Of Missing Out (FOMO). This is a psychological trap that causes anxiety even for the most skilled traders. However, a great trader is able to control themselves because they have mastered the art of patience, but an impatient trader will make irrational decisions during these moments of anxiety. The problem is that they are being driven by a fear that they might miss out on a potentially profitable move. This fear causes these traders to make emotional decisions rather than logical decisions, which leads to them abandoning their strategies and breaking their own rules, in favour of quick profits. During these stressful situations, a professional trader is able to control themselves by taking a step back, and analysing the situation objectively, and then make an informed and logical decision, rather than making an irrational decision based on emotions.
Embracing the Journey
The best traders have all leant to embrace their journeys instead of focusing on short term profits. These traders recognise that every single trade is an opportunity for them to learn something, and that fixating on the outcome of every trade has no significance on their long term success. By shifting their focus from quick profits and the outcomes of every trade, to learning, development and improvement of themselves and their trading process, these traders are able to set the stage for a more peaceful, sustainable and successful trading career. Here are some of the ways in which having a long-term perspective and embracing the journey can benefit your trading:
1: Knowing when to walk away
A patient trader is able to view the markets and conduct their analysis thoroughly before deciding on whether to take trades or not. If the markets are moving sideways and not appealing, then a patient trader will be able to step away and not get involved. An impatient trader is focused on making quick profits so even messy market conditions will tempt them into taking trades when they should have just walked away for the day. But the prospect of having to wait another 24 hours before they can trade is a difficult one for someone who hasn’t embraced the journey.
2: Better Risk Management
Patience allows a trader to prioritise their risk management, ensuring they stick to a strict set of rules. Patient traders will always put their risk before their rewards, utilising better stop loss placements in order to protect their capital. A patient trader will always have strict rules around their position sizes and will never risk more than they are comfortable losing. An impatient trader will either not set a stop loss at all, or if they do, they will often try to have tighter stop losses to try and squeeze more money out of their trades. Thus putting reward before risk. This impulsive behaviour, caused by the allure of short term gains, is a sure fire way to suffer devastating losses and potentially blow accounts.
3: Logical not Emotional
Being patient allows a trader to reduce the effects of the emotional rollercoaster that trading is. Every trader and every trading strategy goes through periods of consecutive wins, but also periods of consecutive losses. Traders who have embraced the journey will be able to ride out the tough times because they expect the losing streaks and they are able to stay focused on the bigger picture. These short term fluctuations in results don’t sway the seasoned traders, so they are able to remain calm and continue making rational and logical decisions, instead of impulsive decisions based on emotions. When impatient traders experience these losing streaks, they immediately assume that their strategy isn’t working, or that something needs to be changed. So they often end up making emotional decisions and jumping to a new strategy, never allowing the probabilities to play out in their favour.
Conclusion
Patience is the key to a successful trading career, allowing traders to navigate through the tough times as well as the good times. Only when a trader masters the art of patience and embraces the journey, can they start to focus on their long-term vision allowing them to rise above the attraction of quick profits. A patient trader is also able to make informed, logical decisions, ensure good risk management, and focus on their continuous learning and development. As I mentioned earlier, trading is a marathon not a sprint. A marathon that requires resilience, dedication and a life-long commitment. Understanding the importance of being patient and adopting it into your mindset and your behaviours is what will catapult your trading from where you are right now to where you want to be. So stop worrying about the outcomes of your trades, don’t assume you need a new strategy after a small series of losses, and embrace your journey because it is full of ups and downs, but as long as you remain patient and consistent, your overall trajectory will always be upwards!