July 18, 2011 at 9:11 am | | Comments 4

Pro’s Are Patient

The British Open is my favorite major to watch.  It requires so much of the players, from execution to mental toughness to using their imagination to get the ball in the hole.  Plus, it happens in July when it’s 147 degrees here in Texas, and I like to disappear into the home theater where it’s cool and dark and watch the guys wearing sweaters as they fight the sideways rain squalls!

patient-tradingIn watching yesterday’s final round, the leaders were each asked during their pre-round prep what the most important element would be for their game in the final round.  Without exception, they all said the same thing:  Patience.

Experience taught them that.  Eventual winner Darren Clarke was quick to admit he’s not normally a patient person, yet that was his focus as he headed out to try to claim his first major title.

A little gray hair goes a long way.

Had it been an interview with amateur leaders of the local club championship, the answers given may have been along the lines of “I need to make a lot of birdies.”  And while that may be true, it’s not the priority of a pro when conditions are less than ideal.

True Confidence

Patience is not my strongest suit.  I’m aware of it though, and therefore continue to keep impatience in check.  I have to work on it.  Self-honesty is important though, so I can’t ignore the occasions where impatience costs me opportunity, and those in turn serve as reminders to wait for the best opportunities to come along.

Through my premium service, I encounter a lot of traders who are overly anxious.  Impatient doesn’t even begin to describe them.  They’re willing to throw caution to the wind just for the thrill of being in something.

Or to avoid looking scared.

I think they fear it’s a show of cowardice if they sit on the bench for a little while.  Ironically though, the biggest sign of confidence that you know what you’re doing is having the guts to sit on your hands when you don’t see what you like.  You don’t chase the wind – you have a plan, and you execute it when the time is right.

Instead of taking that approach, these highly impatient traders don’t realize the primary importance of preserving capital and the secondary aim of turning a profit.  Instead, they want to be highly active every day, and it’s as though they’re missing out if they exercise some caution.  I don’t mind telling them that my service isn’t the right fit for those who feel the continual need to be in something.

Wait For It

The fact of the matter is that there are times when the sidelines are the best place to be.  Just like the British Open leaders identified the greatest virtue of the day to be patience in the face of harsh weather conditions and tremendous pressure, you as a trader have to recognize when patience is the best course of action for you.

You’re still agile enough to take action should conditions present an opportunity, so it’s not as though you’re immobilized or stuck like a buy-and-hope investor type.  But when the market is overly sensitive to the news flow, we’re getting huge gaps on nearly a daily basis, reversals are happening frequently, and the setups are sparse, the best course of action is to take very little to no action.

We all know the oft-used quote from Jim Rodgers, but it’s this kind of attitude I’m referring to…

“I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, ‘I just lost my money, now I have to do something to make it back.’ No you don`t. You should sit there until you find something.”

If you’re predisposed to trading the long side, then wait for market weakness to dissipate before committing capital.  If you like the short side and we’re seeing relentless rallies, the only thing you’re missing out on by not trading is pain.  Recognize that and embrace the option of doing nothing when what you see doesn’t fit your skill set.

Professionals know there are times to lay low and wait for the best opportunities, but amateurs tend to force the issue out of impatience. Which would you rather be?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or Facebook to keep up!

RSSComments: 4  |  Post a Comment  |  Trackback URL

  1. Excellent post.

    Patience is definitly a virtue in life, especially for a Trader.

    Thanks Jeff

  2. Great post and very true.

    When I was in college I worked selling bet tickets at a greyhound track. Made a ton of money….betting.

    Since I was at that track every single night and watched every single race, I felt no great need to force bets. Of the 15 races per night, I would bet maybe 5-8 of them.

    In most, there was just no edge so I skipped them.

    If you ever tried to bet all 15, your would lose money guaranteed.

  3. Thanks for stopping by Bill, it’s great to see you here! You’re right, patience applies to just about everything – another example of how our trading is likely to reflect our general personality. Good point!

  4. Thank you Rob, that’s an interesting background. Interesting how being around that environment via selling tickets also taught you to be selective with which races to bet. Best thing about trading is you can put money on stocks after they’re out of the gate!

Sorry, comments for this entry are closed at this time.