After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! – Jesse Livermore
Ask the average trader what it takes to have big profits in trading and you’ll get answers along these lines: high win-rate, luck, assume large risks or trade frequently on short time-frames. Very few, if any, will mention patience, despite it being a major factor in successful trading. That’s why I’d like to shed some light on the subject and get you to look at it from new angles. I won’t talk about patience in general terms, like for instance, when someone just starts trading, it’s obvious that he/she will have to be patient in learning the ropes. What I want to talk about is the role of patience in your trading approach.
To start with, you need to patiently wait for your specific trading setups to come up. That alone will separate you from a lot of traders who feel they have to do something every few hours, or every day. Secondly, once you are in a winning trade, you must have patience to let the profits accumulate. That’s the hardest part for most traders, the part which makes the difference between a losing or a so and so trader and a profitable one. Yeah, but the market might turn and my profit will disappear, is the often heard rationalization of the impatient trader. It’s true, sometimes the market will turn and touch either your initial stop-loss or your trailing stop. That’s the reality of trading, and I’m not here to sugarcoat it for you. But bear this in mind: If you don’t put yourself in the position to have big wins, you won’t be able to make up for the losing trades. There’s an old adage that’s very true and relates to my point: ‘While amateurs go broke by taking large losses, professionals go broke by taking small profits’
I hope that I’ve made it clear why I believe that patience is mandatory for successful trading. But I don’t want to end this article without a word of warning. There is also a wrong kind of patience, usually exercised by traders who either don’t use stop losses at all, or use very large ones. It’s the patience of staying with a losing position waiting for the market to come back and bail you out. If you find yourself in this category, just stop. Realize that you’re doing the exact opposite of what successful trading is all about and start putting your patience to good use.