In the world of financial markets, active trading is akin to navigating a bustling bazaar, where opportunities and risks abound at every turn. Amidst the whirlwind of active trading, there stands a quiet, unassuming virtue that is often underestimated by traders, but absolutely indispensable: patience.

Picture a skilled archer drawing back the bowstring, taking careful aim, and waiting for the perfect moment to release the arrow. In much the same way, patience in active trading involves waiting for the right conditions to align before making a move.

In this article, we’ll dive into the reasons why patience is a key characteristic to active traders, so then you can be equipped with the knowledge and strategies needed to harness the power of patience for more successful and sustainable trading endeavors.

Understanding active trading

As we explained in our previous article Investing vs Trading - What’s best?, active trading involves the frequent buying and selling of financial instruments (stocks, currencies, commodities, indices, and ETF among other) with the primary goal of profiting from short-term price fluctuations over a few seconds, minutes, or days.

Scalping, day trading and swing trading are the most popular types of active trading.

While swing traders hold positions for a few days to weeks, capitalizing on medium-term price swings, scalpers and day traders open and close positions within the same trading day - with scalping being the most active trading, as it is used like rapid-fire trading seeking to profit from small price movements within seconds to minutes.

The major advantage of active trading is that it offers potential for significant profits in a short time, especially if you’re using a reliable CFD broker like ActivTrades. It can also be intellectually stimulating and provide a chance to be actively involved in the markets and take advantage of changes in market dynamics. This is especially true when using derivative products such as CFD, which allow you to profit from short-selling.

But active trading is also a very risky type of trading, as the potential for loss is high. It is also time-consuming and emotionally taxing, leading to impulsive decisions. Most active traders also experience adrenaline rushes that can become quite addictive.

Why do you need to be patient to be successful in trading?

Successful trading hinges on the imperative need for patience. It plays a multifaceted role in enabling traders to navigate the treacherous waters of financial markets with poise and strategic acumen.

After all, active trading is not just about numbers and charts. It is a battle of emotions, and all active traders experience a roller coaster of feelings when they trade, emotions such as greed, fear, impulsivity, and FOMO (Fear of Missing Out), among others!

So, how is patience necessary to become a successful trader?

First and foremost, patience acts as a vital counterbalance to the emotional turmoil that accompanies active trading. It empowers traders to exercise restraint by waiting for opportune setups to manifest before executing trades. This deliberate approach effectively mitigates the impulsive tendencies that can lead to rash decisions.

Moreover, patience serves as a guardian against overtrading, a perilous pitfall that not only accrues significant transaction costs but also saps profits over time. By discouraging hasty and excessive trading, patience preserves a trader's financial resources and mental fortitude.

Patience is also crucial when confronting the turbulent seas of market volatility. It grants traders the capacity to stay composed amidst swift price changes and market fluctuations. This calmness forms the foundation for making logical decisions, protecting traders from emotionally-driven choices that may lead to significant losses when market participants are overly nervous.

In addition to its role in emotional and cognitive bias mastery, patience fosters an environment where traders are more apt to objectively assess market conditions. It also bolsters disciplined risk management practices, preventing traders from falling into the pitfalls of impulsiveness and reckless decision-making.

Impatient traders often try to recover losses quickly by ignoring their risk management rules and taking larger risks, which can result in a further downward spiral and potentially devastating losses. Impatience also erodes overall trading discipline, causing traders to abandon their well-thought-out trading plans in favor of impulsive actions.

Finally, patience encourages adaptability, ensuring that traders are willing to pivot their strategies when market dynamics shift. In doing so, traders not only avoid common pitfalls of impatience but also position themselves for long-term success in the ever-evolving world of trading.

10 steps to follow to be able to develop patience in your trading

1. Understand the importance of patience in trading.
2. Set realistics expectations and goals regarding your trading.
3. Create a comprehensive trading plan and stick to it.
4. Write a trading journal and review your trading frequently to reflect on your trading experiences and the challenges you had to face to keep being patient.
5. Accept losses, imperfection and the fact that you cannot remove the influence of all biases, but try to reduce their influence on your decisions and trading outcomes.
6. Analyze which emotional, cognitive and psychological biases have the greatest impact on your trading.
7. Take concrete steps, tactics and strategies that will help you counteract each bias to remain disciplined and patient in all cases.
8. Engage in mental exercises and practices that enhance emotional control and discipline (meditation, mindfulness, stress-reduction techniques…).
9. The more you educate yourself about trading dynamics, market mechanics, and the factors influencing the asset prices you’re trading, the better equipped you'll be to navigate the markets with composure and patience.
10. Use technology to your advantage, as leveraging technology can be a game-changer in helping you remain patient while trading, you could use price alerts, trading bots, news aggregators, trading simulators, social trading, etc.

In the fast-paced world of trading, where fortunes can change in an instant, patience stands as the foundational pillar of trading success, as those who master the art of patience become resilient and adaptable traders, that will not only survive but thrive in the ever-evolving trading landscape, prospering in both bull and bear markets.

Patience begets discipline, instilling a sense of restraint that tempers impulsive actions and rash decisions. It is the driving force behind well-considered, rational choices in the face of emotional turmoil. Moreover, patience acts as a potent catalyst for reducing stress and promoting consistency.

The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.

All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.

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