Sitting on hands

Without a doubt, I think the most difficult thing for a trader to do is sit on the sidelines. We have a natural tendency to want to trade trade trade and then trade some more. I think we tend to over-trade by default, with the mistaken assumption that more quantity will equate to more bank. But let us not forget that money is lost as quickly, if not quicker, than it can be made. That a trader could go through all his motions and end up with a gain on the other side -- is a feat in and of itself.

The underlying philosophy here is that we are not in control. Even if we wanted to be, we still could not be in control. The market has a mind of its own, and it's called "crowd behavior." Fortunately for us, crowds are not the smartest beasts on the planet, and they tend to move in very slow and predictable ways. In fact, they move in patterns if you look closely. There are lots of patterns -- maybe even limitless -- and as a trader we only need a few good ones to claim our "edge."

So if we believe that nothing we could do would ever impact the market's behavior (note: believing anything else would be denial) then it should be apparent that our key tasks are:

1. Put our ear to the wire, take an abstract bigger-picture assessment of what's happening, and find those patterns so we have an edge to work with;
2. Utilize correct money management (ie position sizing) so we can always trade tomorrow; and
   
3. Control our human emotions so we do not get sucked into the crowd. The crowd is a moving target and constant temptation.
   

Right now the most difficult challenge for me is #3, because I'm starting to get antsy. I can't wait to jump into a trade but I know that is not a wise feeling to harbor. In a lot of ways, it seems like I'm more tempted to get into a trade than sit still watching the clock tick. With all the unsettling geopolitical news, skyrocketing volatility and stock market computer glitches rattling the regulators... it's no wonder I feel like I'm on a caffeine high waiting for the next opportunity -- any reason at all to grab hold and hang on!

Fortunately my trading rules are pretty strict though. They probably keep me out of the market more than they allow me to be in the market, and that's a good thing. Because the majority of the good cherrypicks happen when the markets are trending. Temptations happen in conditions like we have now when the climate is uncertain at best. We need a catalyst, something to get the crowd moving again. And the movement needs to be slow and tending, which will then become trending. Then it will also be predictable and we'll see those familiar patterns start popping up. That is when I will strike with force.

This week has been an intermission for me so far. Right now, I'm watching the following pairs with interest. I'm looking for patterns, but I haven't seen one that I can trust yet. It could come at any time. And from experience, I also know that when patterns start forming, they tend to come in waves: we could see multiple patterns setup all at once. In that case the challenge will be to go shopping and pick only the plumpest, juiciest cherries.

Aussie/Yen (short) -- RIPE
Euro/Swissy (short) -- RIPE
Euro/Yen (short) -- RIPE
Pound/Yen (short) -- RIPE
Dollar/Swissy (long) -- RIPE