Guide:
When I first started trading, impatience was a major problem I faced. I rush to open positions that don't quite meet the entry criteria of my trading plan for fear that I will miss a significant price move.
When volatility increases and currency prices fluctuate, I get jittery and sometimes get out of the market early. I spend way too much time watching intraday price action even though it has absolutely nothing to do with my long-term trading strategy.
Over the years, I have slowly summed up these several strategies to avoid impetuous and disorderly transactions. Often, these strategies include tools, habits, techniques, and techniques that make me more patient and disciplined.
Causes and effects of impatience
In trading, fear and greed are two powerful enemies of human beings. Traders may have fear of missing out (FOMO), fear of losing money, or fear of doing the wrong thing.
Greed comes into play when traders want instant gratification, are attracted to "get rich quick" schemes, or hope for unrealistic profits. Another emotion at play is boredom. It can be said that good trading is methodical and disciplined rather than agitated and exciting activities.
Some negative effects of impatient trading can include:
Taking too much risk: Desperate to make a lot of money quickly, traders will enter into trades with too large a position size or too much leverage. Likewise, in FOMO, traders may become impatient to place trades when the risk/reward ratio is no longer in their favor.
Overtrading: Blindly entering trades that do not meet the criteria of the trading plan.
Getting in too early: Fearful that the price will move away from their expectations, traders will rush to trade at a price where the risk-reward ratio is not right. Or, for fear of losing too much money, the stop loss will be set too close to the entry price.
Exit too early: Fearing that the price will go against them and profits will evaporate, traders will exit before reaching their price target.
Undoubtedly, there are some universal ways to overcome the fear, greed and boredom that come with trading. However, in my experience, a combination of practical applications of these specific strategies has proven to be most effective.
1. Use early warning to monitor the market
I use alerts to notify when prices reach levels I'm interested in buying or selling. At any given time, I might have 20 alert messages set up.
The original intention of setting up so many alerts is to save time and energy, not having to keep an eye on all the price fluctuations. But over time, I've come to realize that these alerts insulate me from daily price swings and only decide to enter or exit the market when the price is right.
On some platforms, alerts are not limited to prices. For example, on the TradingView website, it is possible to set alerts for any technical indicator such as RSI, moving average, etc.
In a way, these technical indicators are part of an overall trading strategy, and these types of alerts are only triggered when the conditions for entry or exit are appropriate.
Heavy use of alerts sounds too simple to be effective. However, in my experience, they not only save time, but also save the trader from having to observe short-term price movements that are not relevant to long-term strategies.
2. There is no need to keep the account logged in all day
There is no reason to stay logged into a trading platform all day. In my experience, intraday price swings can be unpleasant, but paying close attention and constantly checking your account balance can cloud your judgement.
If you use the alert settings as described above, you will need to log in to the trading platform once or twice a day at most, mainly to enter new orders, update existing order parameters or set alarms. This should take no more than 5-10 minutes and can be done during lunch or when the market closes.
I've also found that some trading platforms will display a daily profit and loss statement (the amount your account has gained or lost today), which has nothing to do with your trading strategy; the only effect of this is that it may cause you to overtrade.
Likewise, the trading platform also displays breaking news, analyst ratings, social media feeds and other non-strategy-related information.
Along these lines, an analogy I've heard is that brokerage sites and trading platforms are essentially like slot machines, with all the bells and whistles encouraging you to make more trades, thus increasing the commission paid to the broker.
Whether intentional or not, trading sites and platforms often publish news and information that conflict with trading strategies.
3. Use dedicated accounts for specific strategies
I trade for a longer period of time so I can hold positions for weeks to months, usually only 1-2 trades per month. This style of trading is also known as position trading, as opposed to short-term strategies such as day trading and swing trading. Position trading strategies take years to pay off, so patience and discipline are very important.
Some traders will mix different strategies in the same account. In my experience, this has several disadvantages. For example:
Mixing different strategies in the same account makes it more difficult to understand the effect of the strategy.
Even though a particular strategy may take longer, you may find yourself watching price fluctuations on an almost daily basis.
System jumping or switching between different systems more often within the same account.
Initially I would mix all strategies into one account, later I decided to create separate accounts for my long-term strategies. I set up these accounts with the intention of trading on the same system for at least 10 years.
Brokers can link multiple accounts, so switching between accounts for entering orders, viewing trade reports, etc. is still very easy.
4. Use smaller test accounts for learning and strategy development
Even with dedicated accounts for specific strategies, I find it beneficial to have one or more accounts dedicated to learning, testing, and new strategy development. For this, I currently have two test accounts for trading stocks and forex.
Using a golf analogy, these experimental accounts are like a driving range, while accounts dedicated to specific strategies are like an entire golf course. A driving range is where golfers hone their skills and make adjustments to their swing.
Likewise, a test trading account is a great place to try out a new strategy or trade more frequently to learn about price action, market behavior, and more.
An alternative is to use a demo account, but real trading or even risking $50–100 per trade can improve your focus and concentration.
Another benefit of these test accounts is that they can divert your attention from long-term dedicated strategies while methodically executing longer-term strategies in their dedicated accounts.
5. Backtest your strategy
If the system is completely autonomous, entry and exit decisions are based on the subjective decisions of the trader. Traders undoubtedly incorporate some rules and guidelines when making these trades, but there are no statistics to substantiate the profitability of the system.
Traders can at least keep a spreadsheet (journal) that tracks information as trades occur. If the system is not suitable for computerized backtesting, manual backtesting can be performed by looking at historical charts and noting when transactions occurred.
When some or all of the system can be backtested, backtesting can provide performance statistics, including but not limited to:
Win Ratio: The expected ratio of winning trades to losing trades. Profit Factor: The ratio of expected profit to loss for all trades. Maximum Drawdown: The maximum percentage the system will lose over time compared to the previous high.
Backtesting can provide many other types of statistics, but I mainly focus on the 3 above. Given my own personality and risk tolerance, I like a system with a trade win rate of at least 60%, a win rate of at least 2, and a maximum loss of 20% to 30%.
In general, backtesting promotes thinking in terms of statistics and probability rather than individual trading.
Even for long-term investments, I prefer strategies that can be backtested. In particular, I invest in index funds and ETFs, and then use relatively simple time models to help manage risk during bear markets.
6. Use smaller positions
Over time, I've learned that position sizing plays a very important role in more faithfully executing a given strategy. On the surface, position sizing is more about financial risk control than instilling patience and discipline.
However, I've always felt that keeping my position sizes smaller helps me maintain more balance and patience. Conversely, when position sizes get too large, fear can take precedence over the discipline and patience required to execute a trading strategy.
There are some good rules of thumb regarding position sizing and risk. For example, most traders will never risk more than 2% of their account equity on a single trade, and more conservative traders will never risk more than 1%.
other tactics
While the above strategies are the most notable in terms of my development and current trading style, some other techniques I have discovered include:
Spread yourself out for active trading: Unless you are a day trader, trading doesn't require full commitment; for example, as a long-term trader, I only spend 1-2 hours per week on actual trading.
Methodically execute a system, but don't spend too much time looking at live charts, logging into trading platforms, watching daily P&Ls, etc. Focus on more productive activities such as:
your day job.
Go to Gym.
Work on other projects.
Study the charts after the close.
backtesting system.
Research new strategies.
transaction log.
Keep learning by reading trading books etc.
Consider partial exits: Presetting some profits and reducing your position size can help you be more patient and allow the remainder of the price to trend towards a more aggressive target price.
Dedicate a second computer to trading: I recently moved all my trading spreadsheets, backtesting scripts, and trading software to a dedicated laptop. The nice thing about this setup is that I only use this computer when I need to update orders, update tracking spreadsheets, etc.
final thoughts
In my experience, there is no quick fix or single strategy for becoming a more patient and disciplined trader. The strategies described above have worked for me, but finding a specific strategy that fits my personality and trading style took time and trial and error. I am always looking for new tools, techniques and tips to constantly improve my trading.
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