When to take Pauses in Trading?
Published by Sharekhan Education | May 16, 2022
When to take Pauses in Trading?
Pause is very necessary in trading if you want to keep your Profit and Loss statement in Green. Pauses tend to break local price trends and enhance price discovery. Even while driving a vehicle, we have to apply breaks a couple of times to reach our destination safely. Pauses play a very important role in our trading. If applied correctly, a break can actually help gain profits in the future. Besides eliminating stress and boredom in trading, a break gives you time to contemplate over your trades. The available time during the break allows you to review your trading strategies.
We don’t have to trade frequently to make a lot of money. It is a myth that those who trade more make more money in the market, but if you look into any successful trader’s books, they take few trades in a month instead of trading daily. It is more important to choose a trade which seconds your strategy and plan and eventually translates into big rewards. As an intraday trader, you get the privilege to choose your battle, and I think that is the biggest advantage we have. One of the biggest lessons that I think I have learned from my trading journey is to trade less and win big.
Trading is not like a job wherein you have to do the same task every day. Generally, traders face a problem because they want to be in the market all the time and the funniest part is many traders do know that trading all the time will not make them money. Taking handful trades is very much important in trading as they will make more contribution towards your overall profit.
Pause comes in various factors:
- Loss
- Profit
- Pressure
- Small quantities
- News/event
1. Loss: If you are continuously making losses, then pause is the best consideration. Take a pause and try to find the reason behind losses and don’t take any fresh trades before you get a solution.
Three consecutive losses make you feel like a loser. You don’t want to lose. Your emotions explode and you start taking revenge trades which further add-on to your losses.
2. Profit: If your daily target is achieved then, take a pause and act as a conservative trader. We should go for only those trades in which there are 2 leg outs with a good odd enhancer score. Avoid being aggressive.
Three consecutive wins make you feel like a super trader. You think that you cannot lose, you are invincible. You over-leverage and over-trade.
3. Pressure: Mr. Sandeep incurred a big loss in a trade, and to recover that loss he took revenge trades, due to which additional losses were incurred, and to recover the entire loss, further losses were made. Don’t you think that revenge trading is wrong? After booking a loss, if you are emotionally feared, then it is better to take a pause in trading.
4. Small quantities: If you continue to trade with a frustrated mind, you will lose more money. Once you get back to a proper trading mindset, start trading with small position sizing to retain that confidence, and after that, you can trade with the initial position sizing which you used to trade earlier. In case of personal problems, do not trade; better to take a pause till you are calm and stable. Never take a trade when you are emotionally disturbed which can affect your analysis. Trading with an unstable mind can affect your trades and fetch adverse trading outcomes.
5. News/Event: Avoid intra-day trading on the day of news/event in that particular stock or sector which may result in losses specially if you are not there in front of system and due to event day emotional pressure may rise which may further increase loss making trades.
Summary:
To summarize, pauses are crucial part of trading. It is very necessary to take a pause in trading to control your loss and to control the emotions which may affect the trades in a negative direction. We at Sharekhan Education heavily emphasize that for a 360-degree understanding of trading and investing, its concepts, and its strategies, we highly recommend you go through our extensive courses and pick out the one that best caters to your needs!
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