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When Trading, It's Okay to Stand Aside

Many traders feel that they must be in the market all of the time. Wrong! There are times when it is prudent to "Stand Aside". This happens to be one of those times. The wild swings we have had in the markets are indicative of uncertainty. Uncertain markets are prone to large moves up or down on news. Case in point; at this writing, there is news that the government is going to step in with a repository RTC type plan to save failing banks.

Nobody at this time knows the details but the news of the plan drove the DOW up 410 points in the last few hours of the trading day. Certainly, money can be made on such swings but the lack of orderliness can be unsettling and trading in such an environment can be akin to playing roulette in Las Vegas. Trading during massive moves appeals to many traders, which is fine. However, I have known many to get crushed when trading those kinds of markets.

I recently closed some short positions for a nice gain at what appears to me to be a short term bottom and until the market begins to stabilize with narrower range sessions, I will "Stand Aside" or at minimum enter only hedged positions. It really is ok to "Stand Aside". It doesn't mean you are a "Trading Wimp". It means you are smart. Who cares anyway, your trading patterns are your business. I prefer to catch the "Belly of the Move". You can excel in trading by being a trend follower.

You don't have to pinpoint every top or bottom. Although, as you progress in your trading, some of you will be able to develop your skill and ability to see turns in the market and that is a bonus. Please don't play that game until you are ready or you will get hurt.

Remember, be true to your trading plan. Do not trade with emotion. Understand the importance of position sizing and diversification. (Position sizing and money management will be a future article so stay tuned.) Finally, I heard an anecdote that was shared on CNBC this week by Dennis Gartman of "The Gartman Newsletter". He spoke of when he was a floor trader and experiencing a market similar to what we are going through now.

While trading in the pit, he turned to a colleague and said, "Are you nervous?" His friend responded "Yeah! and I am flat!" (Flat means no positions.) If you know when to "Stand Aside" and be "Flat", you will more than likely enhance your trading results and be able to sleep at night.

Article Source: http://www.dummiesguideto.com

Mark Espy (aka RobinHood Trader)is a full time trader and professional educator. Mark loves to help others master trading skills and is co-founder of a rapidly growing trading education company. Receive a free lesson and learn more about how to improve your trading skills.

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