Emini Day Trading Lessons: 4.5 Points – Prioritizing Patience
I'm going to try and keep today's Journal post short and sweet as I've got lots of things on my plate today. Lunch with friends, some annoying appointments to keep, some afternoon hockey, bottling my recent homebrewed beer creation... just regular stuff. I might even try to get a YouTube video out there. Since putting these recent journal posts together a few people have got in touch to give me a hard time about that which seems fair enough. It's definitely been a while since the last update!
Overall we're still in the midst of slow summer markets but the trading isn't really that bad at all. Sure, I'm having to wait a bit longer sometimes for setups or to let trades play out but there's nothing wrong with exercising some extra patience once in a while. Patience is kind of like a muscle in that way - the more you use it the easier it becomes the next time.
After a while most experienced traders have no issue just waiting things out and sitting on their hands if they need to. After all, they know that sometimes the best trading position for building and maintaining profitability is simply not having a position at all.
Wait and Be Ready to Strike
I've talked before about the importance of patience for traders and some of the situations where that patience is often rewarded with large price swings. Today was a test of similar principles.
I tried a quick short early on that I knew was lower percentage to break so I kept my risk tight but after that the market simply refused to move. For many newer traders this can be frustrating. After all, if you want to be a trader then you need to trade, right?
So instead of waiting things out they search for opportunities that don't exist and certainly don't fit their plan. They force poor trades simply so they can feel involved rather than trading their edge. Clearly this is not likely to be a winning strategy.
I often see these slower, tighter periods differently. I see opportunity. Admittedly it might not be right away but this sort of market behavior often leads to unusually large moves once price finally does break. The tighter things get and the longer they consolidate the more potential energy essentially gets built up for an eventual move.
It's like a spring getting coiled up tighter and tighter so as long as you wait and don't try to jump the gun there's often going to be good setups to come. Like anything in the markets you can never be completely certain but it occurs often enough to not see any reason to try and force anything just to find a bit of action.
Just Hanging Around
Similarly, sometimes you just have to sit in a trade and wait it out. It would be nice if every setup taken resolved itself quickly but some positions take their time to fully develop, even for day traders.
After getting into a solid momentum and pattern based short price certainly didn't seem to be in a hurry to see things through. I had a strong feeling (aka trader intuition) that price could make a very fast run to the downside if it managed to break a bit lower but it was a considerable struggle to make that move.
There really wasn't much option but to see things through with a hefty dose of patience and discipline. When price didn't push through in 10 minutes or 20 minutes had anything really changed? Was my position somehow invalidated?
No, so it didn't make sense to move a stop to break-even or panic. If it needed to come back to my entry to find more sellers then so be it. It in fact did just that, came into a bit of drawdown again, then made another move.
My management was a bit outside the norm on this one as I did take 1/4 of the position off the table just in case the second test didn't want to follow through given how slow things were but I still held on with the rest.
I guess I didn't completely trust my gut instinct to follow my usual all-in, all-out approach to trade management but I at least had to give it the benefit of the doubt for the most part, right? I'm sure it will forgive me after a sunny patio lunch and a beer or two.
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
I def find that sitting on my hands a struggle at times. So much of what we are fed in the media and our western culture is that you need to have control over your life…and imo I believe that traders have difficulty sitting on their hands and waiting things out because it creates a false sense that one’s not in control of their destiny so then the trader will try and create something…that was never there to begin with.
Hi Cody:
How many charts do you use to trade?
(Just one time frame or multiple)
Thanks
Hi Federico.
I actually just use the 555 Tick for the most part. I do zoom it way out to start in the mornings and will scroll back to identify key areas and look for potential zones of supply/demand imbalance and will draw those forward to the current day. I often don’t go back too far though as I put more weight on recent activity so unless we’re breaking into some major fresh highs/lows I can usually find my zones within the last few days.
The only real exception I make is if we are heading into areas we haven’t visited in weeks or even months. In that case I do have a Daily chart that I use to look at some of the major market reactions and plan accordingly.
Even though I do things that way and it works well there are some traders I’ve worked with that like using another chart for context, like a 1500 or 2500 Tick. I get a similar look to things just by zooming out but I don’t have any problem with traders using those context charts if they find them useful and it provides them more confidence to execute their trades.