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Beware! The Time Money Trap in Trading

By Alexander
In Guest Blogging
Nov 21st, 2012

You are probably familiar with the old adage that ‘time equals money’, and while this is very true in many facets of life such as your day job, it has never been further from the truth when it comes to financial markets trading.

Less is more – and more is infinitely less. I have taught thousands of private investors across the globe, and one unifying trait of the newbie is the overwhelming desire for them to simply spend hours on end glued to the screen, watching price action, trading the trade and talking the talk.

This is counter-productive!

The charts and broker platforms are like temptresses with their moving bars and flashing lights which can be compared to the bright neon lights inside a casino – the longer you eagerly stare at it, the more likely you are to become seduced into pulling the trigger and place a trade – perhaps out of boredom.

beware of time trap

That trade turns to a loss. A trade out of revenge is then placed and quickly turns to a loss. And finally, just like in a casino where the third loss is often the biggest, the third trade is placed out of anger in a desperate bid to make back the losses plus a little bit extra. Sound familiar? We have all been there!

If you have a strategy and only trade if the rules for this strategy are fulfilled then you will be head and shoulders above 92% of people who trade financial markets.

Even if it means waiting for hours, days or even weeks – most of the battle in trading is the patience and discipline involved and these two core skills have consistently proven themselves to be the hardest to master.

Consider the ‘opportunity’ flow of any given strategy. You are likely to have a disproportionate frequency of wins to losses. You could essentially find that the winning outcomes all come at once in addition to your losses – just like busses in London. But to be in the opportunity flow intra-day you will have to constantly man the charts –unless you have the nous to automate a strategy.

So, it will make sense to choose a time frame which will give you the time and  return synergy – where you can receive the optimum amount of reward for the time spent in front of the screen.

I spend no more than ten minutes per day “working” and spend the rest of it enjoying the lifestyle. My trades are set up, and I can then walk away. This is what the daily chart has done for me as I can always be in the opportunity flow from just doing this. This is a far cry away from trading the hourly time frame.  I would have to spend hours on end glued to the screen if I was to do that!

I, like you, chose to trade on a forex market to make a good capital return on my money rather than to watch a bunch of moving bars all day. There is a common misconception that intra-day traders on the shorter term time frames make infinitely more percentage return than the end of the day trades. This, however, is an illusion.

Unless you have an automated system trading on your behalf, you have your money traded by someone else, or are following forex signals – you are receiving the best return in % gain (and even in % loss) if you trade the daily timeframe providing you have a strategy which works.

If you do not have a strategy which works, then seek trader training from a mentor who has credentials and results to prove they are the real deal.

Rob C

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7 Responses to “Beware! The Time Money Trap in Trading”

  1. Buck Inspire says:

    Great post! I totally agree. Spending time watching graphs non stop does freeze me and pushes me toward revenge and anger trades. Less is definitely more. Finally understand this concept after many losing trades.

    • Alexander says:

      Hi, Buck. Glad that you found it useful. My strategy for manual trading is following – make only one trade per day. No matter losing or winning. It saves time and avoids overtrading.
      However, if you use automated trading, let it trade as many times a day as it can. Of course, your automated systems should trade in profit.

  2. Mark Lambert says:

    My own experience and that of my clients is proof positive of this. I update investor clients WEEKLY on specific NYSE/Nasdaq stocks based on technical analytics. Not only do they not have to pay attention to market news during the week, but trades signaled on weekends by analytics are infrequent – around 4-5 per stock per year. Clients like this – they are relieved to be able to achieve greater returns with not having much to do. I do preach patience, as many of the largest trading gains, whether long or short, can arise from sudden price changes after sometimes prolonged inactivity.

  3. Alex says:

    Had similar experience like Buck Inspire wrote. Non-stop watching is hypnotizing, I’ve mentioned it almost every day, but it’s so hard to change own habits 🙂

  4. Eric D says:

    Made a post myself about the importance of overtrading avoidance, good and enough screen time is always a good teacher and a must in my humble opinion, of course it always comes down to the trader’s personality when it is about the best timeframe choice I guess, I have had some success in the small TFs and I really enjoy it but it is not for everyone (may be not even me), time is consumed fast and trading turns stressing so your point is very right, why would anyone spend more than necessary time in the platform when much better ROI is achievable on the higher timeframes?, thank you for the insight, is always refreshing.

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