Trading Patience: Why Waiting for the Right Setup Pays Off

Summary

This morning and yesterday were no-trade days, a deliberate choice driven by a need for patience and selectivity in trading. The trader had a strong start to May, a stark contrast to the previous month where a $70,000 loss stemmed from trading low-quality setups with excessive share size. Currently, with increased share size, slippage on entries and exits can significantly impact profitability. For instance, a 20,000 share position in a $4-$7 stock can incur up to 5 cents per share in slippage on entry and potentially 10 cents on exit, requiring an additional 10-15 cents in profit just to break even before accounting for a stop loss. This means a minimum of 40 cents in profit potential is needed for trades, a target not currently being met by available setups. Instead of trading with smaller size and reduced profits, the strategy is to conserve capital for high-quality opportunities, aiming for a significant profitable day. Last Monday, a $20,000 gain was nearly erased, leaving only $2,800 by the end of the day, prompting a break from trading and a focus on tangible rewards like purchasing fruit trees. This perspective shift helped avoid further losses. The trader also discusses specific stock movements like W, which exhibited extreme volatility, and FCHL and AHL, which were deemed too cheap to trade effectively. The overall market is at all-time highs, which might be contributing to fewer speculative opportunities. Despite a million dollars in profit over the last 90 days, recent weeks have been slow with frequent no-trade days, a pattern observed in previous market cycles. The core takeaway is the importance of surviving slow periods to capitalize on profitable 'hot' market cycles, likening the approach to a big-game hunter conserving energy for a significant kill rather than nibbling on small scraps.