In the dynamic world of trading, sometimes the most astute move is to do nothing at all. The "Sitting on Your Hands" strategy is a disciplined approach that emphasizes the importance of restraint and patience in trading. By adopting this method, traders can avoid impulsive decisions driven by emotions, focusing instead on well-planned trades that align with their goals. This strategy, when combined with a "set and forget" mindset, can lead to more consistent profits and a healthier trading account.
The "Set and Forget" approach is a cornerstone of the "Sitting on Your Hands" strategy. It involves a straightforward process:
By adhering to this method, traders minimize the emotional impact on their decision-making and protect their investments from hasty, irrational choices. The simplicity of this approach can lead to a more tranquil trading experience and potentially more successful outcomes.
Novice traders often fall into the trap of micromanaging every trade. They frequently reassess their technical analysis, obsess over custom indicators, and hastily alter or cancel trades. This over-involvement not only increases stress but also incurs additional costs through commissions and spread fees. In contrast, established strategies are designed to perform over the long term without constant tweaking and interference.
To begin with the "Sitting on Your Hands" strategy, one must first establish clear trading goals. Whether aiming for continuous profits or a more conservative approach, it's crucial to determine the analytical tools to be used, such as technical analysis, chart patterns, or fundamental analysis. A well-defined plan helps prevent expensive shifts in strategy later on.
The primary objective should always be to execute quality trades. Once a trade is placed, the "Sitting on Your Hands" strategy requires traders to trust the market to do its work. This hands-off approach relies on the market's movements rather than the trader's constant intervention.
The essence of this strategy is to generate profits with minimal time and effort from the trader. It's often said that traders lose more money from tampering with their trades than from the quality of the trades themselves. The time saved from active trading can be invested in educational resources, such as a trading education program, a live trading room, or interactive online courses.
While the "Sitting on Your Hands" strategy may seem counterintuitive, various studies and anecdotal evidence support its effectiveness. For instance, a study by Brad M. Barber and Terrance Odean published in the Journal of Finance revealed that individual investors who trade frequently earn significantly lower returns than those who trade less. This finding underscores the potential benefits of a more restrained trading approach.
Moreover, the rise of algorithmic trading, which now accounts for a significant portion of trades in financial markets, demonstrates the value of predefined strategies and the reduction of emotional decision-making. According to JPMorgan, algorithms are responsible for 60-73% of all equity trading volume in the United States.
In conclusion, the "Sitting on Your Hands" trading strategy is a testament to the power of strategic inaction. By focusing on quality trades and allowing the market to work its magic, traders can potentially achieve better returns with less stress and fewer costs.
Uncovering Winning Trades
It’s impossible to have only winning trades, so the goal is to manage the dollar amounts of your trades (both wins and losses) even more than the number of trades taken. Traders come to realize very early on that the quality, not the quantity, of trades is what matters.
Trading Breakouts and Breakdowns
Manage your strategies in your trading plan to handle both breakouts and breakdowns. Before you do, make sure you know what the differences are between the two.
Navigating Your Trading Platform
Did you know that a day trader’s place of business is not the office or desk, but the trading platform? Anyone can navigate the office or desk, but can you navigate your trading platform just as well? Find out why navigating, and perhaps customizing, your platform can have a huge impact on your trading.
