When to Say “No” to Stock Trading

Theories abound as to how to enter and exit stock trades and the millions of traders--some of whom post their strategies on this Web site , are no exception. But as you wait for that Golden opportunity to come around, it’s tempting to enter a trade that seems like it’s almost ripe for the pickin’, but not quite.

Resist that temptation.

Stock trading is all about self-discipline, a subject treated elsewhere on this web site. And while there are a variety of disciplines that good traders must exercise, one very important one is this:  Know what a trading opportunity looks like and be strong enough to wait until that trading opportunity appears.

No matter what kind of trading you’re involved in—swing trading, day trading, momentum trading, position trading, or what have you—it makes no sense to strive for holding a position, long or short, ALL the time.

If you look back over your trading history, you’re likely to find many occasions when you bought a stock out of boredom, out of sheer dislike for waiting out a drifting market or stock. And you’re just as likely to discover that many times you lost money because you just “got bored” and needed to have an iron in the fire—and merely “hoped” that the trade moves in the right direction.

The exuberance of always being in a trade is an emotional trap that skewers many a trader—particularly beginners. Keep in mind that every trade you make exposes you to a risk of losing money. Manage that risk by making sure your trades are unqualified buying opportunities, not just hunches or guesses.

The difference between profits and losses is often tied to what you do while waiting for the next buying opportunity to show its pretty face.