This morning was a great example of how knowing when to not trade is so important.
I would take it a step further. Not trading IS trading. Making the decision to stay on the sidelines is just as important as making the decision to go long something. It is still a decision. Decisions ARE trading.
Often a trader will tell me, I didn’t trade today. I just stayed on the sidelines because nothing looked like a good setup. But that is trading.
Markets did a gap up open and then started heading down. I looked at various stock screens and nothing really looked good. The major indices kept going down. I made the decision to stay on the sidelines until the market consolidates at a particular level.
That was really the right call as markets dropped even further.
Knowing the strength of Bears and the probability of a pullback helped me make the decision to stay in cash.
When I sit on the sidelines and in cash, I want to remain calm and collected. Andrew York helps with that:
Here are more things you can do when you’re on the sidelines. What do you like to do when you’re on the sidelines and waiting for a better setup? Leave your comments below.