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Why Active Trading Doesn’t Mean Better Returns
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Doing more trades doesn’t necessarily translate to higher earnings.
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In fact, the opposite can apply. If the additional trades come from low-quality setups, they could leave you worse off.
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Yet the bigger the market moves, the greater the temptation is to get involved.
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Take what happened last Friday. At one point, the S&P 500 was trading almost 90 points higher than the previous day’s close. You might chastise yourself for missing the move and pile back into the market with a long trade. But then suddenly the market drops, and you kick yourself for not being short.
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Before long, you’re chasing the market rather than letting it come to you – and that’s a dangerous habit. That’s especially relevant in a market like we’re seeing now.
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You have to respect the price action. While broader macro themes might eventually play out, our job is to trade the market that’s in front of us.
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Tune in to Trading With Larry Live 
Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! |
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When Sitting on the Sidelines Is the Smart Trade
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Being a professional trader is not about participating in every move. You only put your capital at risk when the odds are sufficiently in your favor.
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There’s an opportunity cost to taking a mediocre trade. It consumes your capital and your attention, potentially leaving you compromised when a stronger setup appears.
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That’s why I’d rather miss a trade than try to manufacture one.
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Of course, there’s a big difference between being hesitant and being selective. When a strong setup appears and the risk/reward profile stacks up, you need conviction to enter the trade.
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Until then, there’s nothing wrong with sitting on the sidelines. Sometimes that’s exactly where you need to be. That way you still have your capital and a clear head for when a genuine high-probability opportunity comes your way.
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Remember, you don’t get paid for how many trades you make or how many hours you spend in the market. You get paid when you successfully bank profits – and have the discipline to know when to keep those funds in your pocket.
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The good news is that with oil, inflation, bond yields, and interest rates all pulling on the markets right now, we’ll see plenty of opportunities ahead. We just need to be patient and wait for the right ones.
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After all, sometimes the best trade is the one you don’t take.
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Happy Trading,
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Larry Benedict
Editor, Trading With Larry Benedict
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