The importance of patience in trading

Hello and welcome to the first Two Blokes Trading blog!

This week I am going to discuss patience and why it is so important especially as a retail trader as most retail traders do not have patience. 

Most people who enter the world of trading from the outside think trading is a crazy superfast-paced environment, they could not be farther from the truth. Traders need to be patient, firstly to let opportunities in the market present themselves and even once the opportunity is there, most guys will go straight in full exposure on a trade. This is the wrong approach.  

You need to be patient for the correct timing, and this is when some technical analysis can be used. Those who are in our free app will know I do not use much technical analysis, only for timing purposes only as explained here. 

Once the timing has been correct though you must be patient to allow that trade to work out. Too often retail traders will think because they have bought something or sold something that it is going to immediately work out, incorrect you need to be patient and ensure there are catalysts that can drive this trade and that it will not be a tumble-weed trade.  

If you are confident about the catalysts, you then need to be managing the trade and be patient. Within my time horizon, this can be anywhere from 1-3 months. We need to be patient putting positions on and we also need to be patient when we are taking positions off. 

Retail traders also must ensure that their methodology is correct. Ensure that you are not relying on anyone else’s trade ideas as you will not be able to judge timing and execution and your patience will be impossible to manage as well as your risk. Therefore, I always stress the importance of generating your own ideas.  

It is okay to use someone’s framework, but the ideas need to be your own spark of creativity and developed from your own macroeconomic understanding. It is okay to have the same ideas, but you need to be 100% confident you know why you have it on. 

Because I trade a long-short equity portfolio management I can look to be anywhere up to 6 months ahead of where the market is at. Therefore, we need to be patient with our own ideas as we need to be 1 or 2 steps ahead of the market, not 3 or 4 steps ahead.  

Being too far ahead means we are just investing, and this defeats our mandate as traders. If you are 3 or 4 steps ahead, you could be waiting forever for a trade to pan out and potentially they may never do. Trading any longer than 6 month’s time horizon runs the risk of too many variables entering the market and affecting the performance of the position. 

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Retail traders also need to be patient with their own development. Too often guys on the retail side have been sold the “Trade and earn an Italian sports car in a month” narrative. Quite frankly this does not exist and if it did, they would be immediately hired by the largest funds in the world to trade their money so why aren’t they? Because they do not exist. Trading can take a while to master, and it will not be perfected in a couple of weeks.  

Retail traders need to be dedicated to the process, work hard, and accept that they need to be patient with their own development. They will win some and lose some but overall, with risk management parameters in place, the winners will be more than less losers, and winning traders will be much larger than the controlled losses.  

Being patient with your losses is an exceedingly challenging task but when you manage to control the emotions of losing money sometimes and not rushing to place another trade that is when you are trading properly. 

Overall, we need to be patient with our process, patient with our positions, and then patient with our development as traders. 

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