Losing patience can cost you a lot of money.
It's true, the markets can be frustrating, especially when there is a lot of uncertainty, and that can lead traders to lose patience, which is a classic portfolio killer and often leads to:
- Overtrading, or making way too many trades
- Making sloppy trades with no edge. No edge, no trade!
- Poorly timed trades at bad levels, or trading less efficiently than you should
Fortunately, for traders, patience is a skill that can be learned, but first, you have to know the three reasons why traders lose patience:
- Fear of Missing Out: You hear about others making money and have a compelling fear inside that if you don't participate now, you'll miss out on an opportunity to make money.
- Boredom: You get tired of sitting on the sidelines, watching things happen for others. As a trader, you want to participate, and getting involved is an easy thing to do.
- Trying to Make up for Previous Losses: We've all come through a time recently where we've lost a lot of money in our portfolios. We're frustrated and want to make it back as quickly as we lost it.
There are four simple ways traders can learn the skill of patience:
- Use “feelers,” or small positions, to help you find the direction. Like a golfer throwing blades of grass in the air to find out which way the wind is blowing, traders can use small positions to find out which way the market is going.
- Scale slowly into or out of positions. This allows you to employ more patience with your portfolio and your trades, and will help you build the right positions at the right time.
- Document what triggers you to lose patience. Once you recognize those triggers, you can do something about those behaviors.
- Have a “build,” rather than a “make” mentality. Trading is a game of processes. You want to build days to make weeks, build weeks to make months, and build months to make years.
Over time, having patience will allow you to be successful and will help your portfolio to grow.
Watch the video for more details:
By Dr. Doug Hirschhorn of DrDoug.com