Day Trading: Take What the Market Gives You

If you’re an active day trader, the chances are high that you’ll trade a small number of products or you’ll exclusively trade a single product. By doing so you’ll have the benefit of learning product specific characteristics and becoming more in tune with market context. But there’s a possible downside to this too – sometimes markets move about a lot and sometimes they are painfully slow. While in itself this shouldn’t be an issue, for many aspiring traders it seems like a Catch-22 situation. When markets are particularly slow it seems like there aren’t enough opportunities available for them to learn and develop their skills, but if they try to find trades where there are none, they will often find themselves taking losses, and more importantly, having negative learning experiences such as fighting the market. Learning to take what the market is willing to give is a skill in itself.

A Cocktail of Issues

Both the urge to trade and the assumption that there won’t be many opportunities can give rise to a number of struggles that can define a trader if they’re not careful. At the most basic level, your p/l is likely to be adversely affected. Losing money or missing out on profits in a way that is contrary to your plan can have a negative psychological impact on a trader. Particularly with over-trading, emotional energy can quickly become depleted. This is stressful, demotivating and can cause a trader to take the wrong lessons away from their losses – and this has the potential to create major obstacles over an extended period of time. But also missing opportunities that should have been taken in accordance with your plan, either by not being focused on trading or because the other trades you’ve already taken have pushed you to your daily loss limit, can be mightily frustrating. Fear of missing out can then cause you to second guess the market.

In addition to p/l and psychological issues, a hugely important issue that people often forget about is very simply about understanding the efficacy of a strategy. Taking trades outside your plan “muddy the water” and make it harder to assess the efficacy of a particular strategy. Of course it is possible to manually tag each trade you take with the strategy it’s using in your trade journal/log, but many don’t do this. Having the chance to assess a strategy on its own merits is crucial to being able to develop it and your own trading skills. Even if you do have a way to differentiate trade types, you’ll find it harder to pick apart over-trading or keep a log of trades you didn’t take.

Que Sera, Sera…

The solution to this issue like many others in trading is a change of mindset. When you sit down to trade, you must believe that markets provide an endless stream of opportunities and you cannot always predict when the next one is likely to be. So you must allow the market to determine the frequency of opportunities that it advertises to you. Not forcing trades and trying to find ones where there are none, but also staying focused enough to catch the ones which do occur even in quiet markets, will allow you to remain in tune with the markets and on track with your trade plan. Accept that the market will give what it wants to on any given day and is rarely the same from one day to the next. Finally, if you are learning and are hungry for trading experience, make sure you focus on the trades that you do take in order to learn all you can from them.

Trade well.

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