Majority of Traders who trade Stock markets know when/How to enter the trade but 95% of traders do not know when not to enter the trade or when not to trade. Trader should trade when opportunity arises based on his trading system and trading strategy. Knowing when not to trade is also a vital part of trading plan .
So much of our research and analysis as traders focuses on figuring out when to get into the market. That’s why we often neglect to consider when staying out of the market is a better option.
In fact, learning how to handle when not to trade and avoid taking unnecessary risks, for a lot of traders, is the key to success.
If it Doesn’t Feel Right, Don’t!
This might sound like common sense. But, especially for newer traders, there is this drive to jump on every opportunity. Even if you’re not sure about it! No one has a gun to your head to trade. And there will always be another market opportunity coming up.If you absolutely have to trade and can’t let a potential trade go by, then there’s probably something wrong with your money management strategy.
The simple answer for when you shouldn’t trade is when your strategy says you shouldn’t.
Wait for opportunity to come think of Virat Kohli he does not hit 4 on every ball but when he sees an opportunity he goes ahead.
Checklist of When Not to trade
- When you are confused, not getting clarity, Things not moving as per your plan, Just stay out and Protect you emotional and trading capital.
- You made a trading plan, but stock either open with Huge Gap and no opportunity in sight, close your terminal and stay out of market, Never try to climb a running bus.
- Emotional times. If something emotional is happening in your life and you can’t maintain your concentration , don’t trade! This could be any number of things that had a negative impact on your day.When trading, you need to be able to assess what is happening in quite a short amount of time. If you are mentally elsewhere then this will have a negative impact on your trading account. Emotionally taxing events are without doubt a sign of when not to trade.
- Speeches. These tend to be on the economic calendar as well. If specific people are talking, please, do not trade. These people include the ECB President Mario Draghi, Fed Chairman Jerome Powell, and RBI Governor Shaktikanta Das. Market react in volatile manner avoid trading
- As Earning Season is in full swing and stock you track will reports earnings the next day, Do not trade till earning announcement is over, High chance of getting whipsawed if you try to trade during earning announcement, Take trade when you have clarity.
- You are a momentum trader but their is not momentum, Market is in sideways move avoid trading.