Every Live Traders style, from Core Trading to Micro Trading, benefits from certain market conditions and suffers when certain other market conditions take place. This is a fact of trading. Many Live Traders students have heard someone saying it was time to “SOH” (Sit On Hands), but can’t determine why this is so. Usually, SOH is attributable to the markets being “whippy” or “sloppy” but most couldn’t determine the definition of these terms. Let’s delve into this subject which is important to the performance of any trader.
The strategies contained in any trading plan could be used by a trader in two vastly different scenarios. The first would call for taking as many patterns as possible independent of the market conditions (A strategy that will usually result in overtrading and high commission costs). The second course of action would determine the market conditions one would require in order to trade. This latter is what we denominate The Live Traders Top-Down Approach (from PTS) and it tends to increase the odds of taking better percentage plays. When you decide to focus on Top-Down Analysis, you have to establish the parameters that would be “higher odds” and obviously the opposite would determine the “lower odds” conditions. Once this is accomplished, the trader will take as many trades as possible that meet his stringent criteria as long as they exist within a certain market condition. Let’s say that a long strategy benefits from an uptrend in the major averages. There will come a time in the uptrend when the prices are going to be “extended” and “overbought”. This would suggest a pullback in the average. Oftentimes these pullbacks have been very quick and shallow events. In this scenario, the professional trader could decide to SOH for the most part in terms of swing positions, as the odds continue to be on the long side and short positions for the most part (with the exception of very weak stocks and sectors) tend to require a very strict shorter time-frame management style. Or he could attempt to trade with much tighter price objectives and a tighter management (Perhaps based on 60-minute charts).
Sitting On Hands in Live Traders Chat Room
In the Live Traders Chat Room, traders have the unique advantage of real-time market insights and trade ideas shared by experienced traders. However, there are times when the market conditions may not align with the strategies being discussed. During these periods, experienced traders often advocate for the “SOH” approach, advising members to refrain from trading until favorable opportunities arise. By exercising patience and discipline, traders can avoid unnecessary losses and preserve their capital for more favorable market conditions.
Adapting to Market Volatility
Market volatility plays a significant role in determining the effectiveness of trading strategies. In highly volatile markets, prices can exhibit erratic movements, making it challenging to execute trades with confidence. During these periods, traders may opt to widen their stop-loss orders or reduce position sizes to account for increased market uncertainty. By adapting their trading approach to current market conditions, traders can mitigate risks and enhance their overall trading performance.
Maximizing Trading Opportunities
While sitting on hands may seem counterintuitive to active traders, it’s a strategic decision aimed at maximizing long-term profitability. By exercising patience and discipline, traders can avoid impulsive trades driven by emotions or market noise. Instead, they can focus on identifying high-probability setups and capitalizing on favorable market trends. Through continuous education and experience, traders can refine their trading strategies and achieve consistent success in the markets.
