Healthy trading is trapping and not chasing price 2016.03.16

Dear Traders,

The best trading is derived from careful planning and trade execution. Yet repeated up/down market movements give the illusion that you are missing out on the action and profits. Traders therefore often feel like they need to enter a trade setup right here, right now. The undesired outcome of acting on this feeling, is that a trader enters the market at unwanted price levels.

I admit the market trapped me

All of us have made the simple yet irresistible mistake of entering a trade setup when price moves quickly. Maybe you will recognize yourself in the following situation.

The excitement dramatically rises as price action picks up speed. Your mind starts wandering off and thinking about the profits that could be made if only you were in that trade. The internal pressure is too much to handle and you impulsively decide to enter the market. You simply do not want to miss the profits and the fast moving market means you think you need to act fast right? Wrong. As the initial excitement fades away, you slowly realise you have sadly acted out of excitement and greed, rather than because it was strategically correct to do so.

In the above scenario, I knew my decision to chase the market made no sense at all. The setup was not part of my trading plan in any shape or form and I did it anyway. But now I understand why I acted this way, I won't be doing it again.

All traders chase the market at least once and that's ok

We learn from experience. Most traders have the best intentions at the start of their trading day, but emotions can quickly derail when there are volatile price movements. Traders respond by entering too early or late and losing sight of their core mission, which is to follow your trading plan and control your risk management.

The most significant factor in chasing the market, is the feeling of time pressure. This distorted sense of time leads traders to make hasty decisions - buy impulsively and close unfavourable deals. Remember, the moment you enter the market, you have settled for a price and the negotiation phase between you and the market is over (trade management and exit are the next two steps).

My shared experience informs that patience in Forex trading is of the utmost importance and cannot be underestimated.

But you can trap the market too

My anti chasing the market advice is simple - turn the role around. You should become the trapper and negotiate with the market on your own terms, which are formulated and documented in your trading plan.

Trading is about entering the market where there is ability for you to claim an edge in the long run. You do not stake out an edge by chasing the market. You do have a fighting chance if the market develops signals and patterns that justify an entry according to your analysis. In this you case, you are entering at a level and moment that does meet your predetermined plan, which is termed trapping.

Trapping requires that you wait for the trade to meet your conditions, outlook and parameters. It means that you are showing patience by letting price action arrive in your zone of interest before you even think of entering. It lets you counteract the urge to enter the market immediately and provides a sense of calm. In essence, this explains the immeasurable importance of patience in Forex trading.

What do you think is the best method of improving patience in your trading or life? Feel free to comment below and perhaps try an Admiral Markets demo account in the meantime, to test whether you can spring a trap yourself.

Cheers and good trading,

Chris