Hi, I’m Steve Levay and I’m a trading addict. I’ll admit it. Nothing gets the adrenaline pumping like that 9:30am opening bell. I love to sit at my desk and watch the up and down ticks of the market all day long. Despite being a self-anointed addict, there is one thing that separates me from a lot of other trading addicts out there: I have perfected the art of sitting on my hands. That may sound silly, but there is nothing more important than knowing that you have 6 ½ hours a day to trade the market and being disciplined enough to sit, watch, wait, stalk and stalk and stalk until that near-perfect moment. The best traders are not necessarily the ones who make the most winning trades, but rather the ones who are the most efficient.
Most would agree there is probably only “easy” money two hours out of the day, if that. The first and last hour of the day typically seem to be the most rewarding times of the day to trade. So what do you do during the other 4 ½ hours? Most traders don’t get paid to just make trades. Traders get paid based purely on results. Just because I trade 250,000 shares a day doesn’t mean I am going to get paid. There have been many days where I traded 10,000 shares and made more money than the days I traded 250,000.
I did not always understand that concept, however. It took me a little while to subscribe to the notion that patience and discipline could be two of my most powerful trading tools. I used to think: “The more I trade, the more money I will make.” Boy, has that part of my game changed. I love to make money in the first hour, go to the gym, check my fantasy football team, hit Facebook or simply look at charts passively without any intention of making a trade. I regroup. I decompress. I re-energize. Then I get back in trading mode the last hour and a half of the day. An addict can only feed their addiction for so long before it consumes them, and I have been able to make trading a healthy addiction for me.
It is not always wise to follow such a rigid schedule for trading, though. There are some days when it can be lucrative to trade in the middle of the day, and there are some days when you have no edge in the first or last hour. There are some types of the year that provide greater volume and volatility. So then, one might ask, how do I know when to you sit on my hands and when to trade aggressively? In my mind, there are two primary times you should consider stepping away from your desk or minimizing your trading screen. One is when your P&L is not moving, yet you are trading feverishly. When you see your commissions rising and your P&L not moving, STOP. Sit on your hands. It is not worth your time to pile up expenses and potentially lose money while the market is not providing any compelling money making opportunities. The other time to sit on your hands is when there are no setups, no news, and no volume. Don’t waste your time trying to guess direction based on a bias or pre-conceived notion. More often than not you will be shaken out of those types of trades because you have no defined levels or catalysts.
When I am on T3Live radio I say sit on your hands probably 10-20 times a day. I’m sorry if you are tired of hearing me say that, but I truly feel it is some of the best advice I give. I have found in my own trading that doing nothing, at the correct moment, makes me a better trader. I minimize losses and expenses by showing restraint. If you can heed the advice and sit on your hands, you will probably become a more efficient trader, too.
