Thursday, January 15, 2009

I often talk to traders about listening to the market.  The market will always tell you what to do.  We use several market clues or tells to help us figure out what the market is saying.  We created a great tool called the Trading RM Oscillator which helps traders gauge the current trading environment.  We have been saying that the market has been telling us to be patient, trade less, and be focused as the best opportunities often show up when you least expect them.  Traders will often have a difficult time cutting back and trading less when the market dictates it.  By nature, traders want to make money.  When it is time to cut back traders are often conflicted because their desire to make money is greater than the desire to listen to the market.  Many times it is obvious to our new traders that the market is telling them to slow down, however, they are slow to adjust because they want to make money.  I would argue that the amount of money that a trader saves by cutting back during difficult trading environments is just as important as the money made during good trading environments.  In addition, cutting back will often preserve emotional capital as well, which ensures that the trader will be prepared to take full advantage of the next 5 star day.  The master trader will recognize and accept that cutting back is the difficult yet the correct trading decision.

Good luck.