Day Traders Should Use Patience to Improve Performance

improve patience to improve trading performance
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A stock is rising on your one-minute chart; it starts to pull back but then stalls out. You buy expecting the uptrend to start again, but instead, the pullback continues, and you find yourself in a losing position. The price stalls again; thankful for the pause in the selling you get out with a loss. You're upset you didn't wait for a better entry point and aren't even paying attention as the price starts to rally again. You just missed the real entry point and a winning trade. Sound familiar?

Every strategy should tell you where and when to get into a trade, but you need to wait for that moment of truth to arrive. The trader in this example not only lost on a trade they jumped into prematurely, but they also missed the real entry point by being impatient.

Impatience Throws off Your Timing

Losing money because you bought right before a price drop and then sold before a price rise because you were frustrated or disheartened is a terrible feeling. When this situation occurs, traders often think their timing is off, or they're out of sync with the market. While that may be true, a better way to look at it is a lack of patience. Impatient trades lead to unnecessary losses, additional stress, and wasted emotional energy. These factors then cause you to miss valid signals that often occur soon after you get out of a losing trade. If your expectations on price direction are often correct, but you're not usually in a trade when the price moves in that expected direction, your patience is likely off.

How to Improve Patience and Timing

Most traders have a strategy they follow that tells them when and where to get into a trade. That strategy, if traded correctly, should yield a profit; otherwise, there's no point in using it. It sounds simple, but traders face a problem: When watching a fast-moving chart in real-time, the mind gets tricked into thinking you should get into a trade before the trade setup has fully formed. You don't want to miss a trade, so you get in a bit early and usually end up with a loss.

Wait for the setup to fully form and trigger your trade (a trigger is a precise event that tells you when to act). You also have to be okay with missing a trade; only take trades that give you a complete setup and trigger your trade. No trades should occur unless the market triggers it. If you're following your strategy and still getting in a bit too early, have a brainstorming session on what you could do differently. For example, if the price is trending higher and starts to pull back, consider waiting for that pullback to pause before considering getting in. Once the price starts to move sideways (during the pullback), try watching for little clues that the price is starting to go higher again. If the sideways movement (consolidation) lasts for several bars, it may help to watch for the price to move above the high for the consolidation to trigger the trade. If the price is wiggling around during the pullback, try watching for slightly higher highs and higher lows in those tiny price moves within the pullback.

These micro-movements give evidence that the buying pressure could be building again. If the price tends to move in the opposite direction right before it moves in the direction I expect, I wait for that "fake out" move to occur and then act. Until I have multiple pieces of evidence that indicate now is the time to get in, I don't trade. You don't need to catch every big price move to make a profit. Be patient; the market often takes longer to move than we anticipate. If you miss a move, you miss it. By waiting for the valid setup and trade trigger, you'll start catching more of those price moves you're anticipating, and not wasting your money on impatient losing trades.

The Bottom Line

If your timing seems off, wait for your setup to form and to "trigger." If you're still getting into trades too early, adjust the parameters of your strategy so you see a few more price bars (tick bars, one-minute bars, five-minute bars, etc.). This forces you to be more patient, keeping you out of some of those losing impatient trades, and getting you into more profitable trades. As a bonus, you'll have less stress and frustration in your trading.