If you don’t know what to do, don’t do anything. How often as a trader have you been tempted to fidget with your position for no good reason? I would bet that if you looked back at some of your trades that did not work out, the answer would be “more often than not.”
This is usually when fear and greed set in and begin making your decisions for you. It is especially important at times like these to resist changing your trade if you do not have a good reason to do so. Anyone who has been trading for any length of time knows that the markets rarely make a straight line to their targets. The markets will usually advance for a few days and then “reset” themselves before most likely continuing in their original direction. It is during these times, when the market pauses, that you must exercise a great deal of discipline and only alter your original trade if you have a good reason to do so. This is very important. Many traders will change their position without having a good reason. The market moves against their position and they begin to panic. With the panic comes a feeling of having to “do something” to make it better.
However, we have a tendency to forget that the markets are beyond our control. We can not do anything to change what the market will do, but we can change our position. Herein lies the problem. In a desperate attempt to fix the trade, without having a good reason to do so, we end up changing something about or original plan which inevitably leads to less than satisfactory results.“If you don’t know what to do, don’t do anything” can prevent you from adjusting yourself right out of your position. I can not begin to tell you the number of times this piece of advice has kept me from losing money.Yes, it can be uncomfortable to watch the market move against you; however unless you have a good reason to change something about your trade, don’t.
The key then is to know what to do. This means understanding your trading system inside and out. You need to have the confidence to know that the decisions you are making are the right ones and that you are not merely making changes because you feel you have to.
Bear in mind that I am not saying that you should never adjust your trade. Far from it! There will be times when this is the correct course of action; however, you have to know what you are doing when you make the change.
Do not change your trade without knowing why. Do not change your trade simply because you feel you have to do something!!