Trading is about going with the flow of the market, sometimes the market flows smoothly and sometimes it does not. For traders, this would also mean that you will be in and out of the market according to the flow. When the market is flowing smoothly, you stay in and when the market becomes choppy, you stay out. Simple right?

While many of you would agree with what I’m saying here, some new traders may not understand and some of you may struggle to grasp the idea that you do not need to trade all the time. If you are one of them, then I hope to share and explain why you should stay out of the market from time to time. In fact, if you were to ask professional traders, many will agree with the theory of Less Is More (see related article).

With that, I will be sharing some of my insights into why staying out of the market is equally important as staying in. I believe every trader will have their own opinion on this subject. Nonetheless, I am happy to share and express my own view.

1. The Big Boys Don’t Hang Around All the Time

This is an important reason why trend traders don’t want to be trading all the time. It is believed that the market only trends 30% of the time and, for the rest of the time, the market is probably consolidating or is about to reverse.

More importantly, the market don’t trend all the time because the big boys strategically position themselves so that what ever they do, they only do it occasionally and that’s enough to push price in their favour. Once price moves in their favour, they’ll leave it and slowly enjoy the fruits of their labour. Just to be clear, I am not referring to money makers or hedge funds who are in the market only for the short term. I am referring to large institutions who have deep pockets and are capable of pushing the market in their favours.

In fact, this is a simplistic example of how the big boys usually position their orders – Goldman Sachs needed to buy 100 lots of gold in the spot market, they would usually break it down into, say, 10 separate orders of 10 lots each. This is important because the last thing they need is to create a gap in the market by putting the entire purchase in the same order. Also, once the gap is created and they have no more reserves left to cover themselves and they risk price moving against them. On the other hand, when you break the purchase into smaller orders, they can mitigate their risk by scaling into their positions, when previous positions are risk free when broken even.

2. Trading is a Tool for More “ME” Time

Traders need to remember why they are trading the market. Unless you have the passion for trading, most retail traders are aiming to have time and financial freedom. In case you don’t remember why you started, then ask yourself this:

“What is the higher purpose of learning to trade?”

Some of you might say money. If that’s you’re answer, then ask yourself again

“What is the higher purpose of money?”

Keep repeating the question “What is the higher intention /purpose of …?” and replacing the space (…) with the answer you get. And do this until you find the true purpose of why and what you are doing.

Once you get there, you will realise and remember that trading is just a vehicle to help you get to where you want to go. For some, you will also remember that you want to be spending more time on what you want to do – this can be spending more time with family and, for others, this can be spending more time on their hobbies.

Here’s another thing to remember. Just because you are spending more time on yourself, it doesn’t mean you are not trading. Professional traders are constantly aware of what is going on in the market even though they only spend 5 minutes on their charts. Once you are familiar with the market, you can plan ahead because you know the market so well just like knowing your partner or your best friend.

Remember that the market only trends for 30% of the time, when it is not trending, that’s when you spend more me time and less trading time.

3. Because you Can

Recently, I was trying to understanding the trading routine of a veteran trader and came to realise that he rarely opens his charts unless he gets email notifications. Reading in between the lines of what he shared, he probably analyses the market when it is quiet. Then, he plans his next few steps in advance and he puts email alerts at certain price levels. When he gets those emails, he has already mapped out in his mind what he wants to do – this is usually ends up between placing an order and ignoring the market.

You see, many traders don’t realise that the most important reason why you should stay away from the market is because you can. Trading is about learning how the market moves and breaths before creating a trading system that fits your market beliefs (as opposed to finding a system first and trying to fit the market later).

Once you fully appreciate and understanding the market, creating a system that fits what you want is only a matter a choice.

To the person who shared (you know who you are) – Thanks for sharing.

Conclusion

If you are still reading this now, then you would realise that you should stay away from the market because of

1. Market reasons
2. Personal reasons and
3. Most importantly, because you have a choice

Taking on these belief means that you should start focusing on your longer term trading routine. Focus on “as ifs” and pretend that you are already a veteran trader today. Once you can do that, you can also choose to stay away from the market and still remain profitable. Lastly, focus on what you need to do and how to get there, especially because you can.