No Trade – Is A Good Trade Too

You can’t rush the trade. If there is no trade – then so be it.

No trade – “is” the trade.

I know it’s hard, especially when you are starting out. You want to get back out there, you want to see some  action, you want another shot at making some money. But an important skill to learn (actually a very important skill to learn) is to be able to access the current environment, and evaluate whether a trade is even warranted at all.

Capital preservation needs to take priority over new opportunities for added profits – and when the markets are crazy – finding a  trade (and I mean a good trade) – gets increasingly more difficult. You have to learn to include “not trading” in your trade plan. Embrace it, and consider yourself a better trader for it.

When you can’t find a decent trade (certainly consider that perhaps there isn’t one) and tell yourself “Gees! – Thank god I don’t have any of my hard-earned cash tied up in that mess! – I can’t find a decent trade if my life depended on it!”

As you get better at this – you start to trust yourself. The feeling of “not trading” starts to become a feeling of relaxation and confidence, rather than anxious or stressful.

There will always be a trade….just maybe not today.

For what it’s worth – it’s no picnic out there for me these past couple weeks either. I am still looking short USD with a couple of irons in the fire – but am patiently waiting for a move of some substance. The markets are proving difficult as I suggested 2013 would, and regardless of  smaller / less profitable trades as of the past – I am thrilled to have very little exposure.

 

 

 

The Psychology and Practice of Selective Trading

Reading Market Conditions Like a Professional

When volatility spikes and correlations break down, the amateur trader sees opportunity everywhere. The professional sees danger signals flashing red. Right now, we’re dealing with central bank policy divergence that’s creating whipsaws in major pairs like EUR/USD and GBP/USD. One day the ECB hints at dovishness, the next day Fed officials contradict each other on rate policy. This isn’t trading opportunity – this is noise masquerading as signal.

I’ve learned to recognize when the market is in a “news-driven” environment versus a “trend-driven” environment. In news-driven markets, fundamentals get thrown out the window every few hours. Technical levels that should hold get blown through on headlines, only to snap back minutes later. When you see USD/JPY moving 80 pips on a single tweet, then reversing half of it within the hour, that’s your cue to step back. The risk-reward ratios in these conditions are absolute garbage.

Smart money waits for clarity. They wait for the market to digest the information and establish a new equilibrium. While retail traders are getting chopped up trying to scalp every headline, professional traders are preserving capital and positioning for the inevitable trend that emerges once the dust settles.

Capital Preservation: Your Most Undervalued Skill

Every dollar you don’t lose in a messy market is a dollar that compounds when the good setups return. This isn’t just trading philosophy – it’s mathematical reality. Lose 20% of your account chasing bad trades, and you need a 25% return just to break even. Lose 50%, and you need 100% returns to get back to square one. The math is unforgiving.

I’ve watched too many good traders blow up not because they couldn’t read charts or understand fundamentals, but because they couldn’t sit still when the market was offering nothing but coin flips. They felt guilty taking a salary without “earning” it through active trading. That guilt will bankrupt you faster than any blown technical analysis.

The USD weakness I’m tracking isn’t going anywhere. The structural issues – massive fiscal deficits, potential Fed policy errors, deteriorating current account dynamics – these play out over months, not days. Forcing trades in choppy conditions to capture what might be a multi-month theme is like trying to catch a falling knife. Wait for the knife to hit the floor.

Patience as a Trading Edge

Your ability to wait separates you from 90% of retail traders. They need action, they need validation, they need to feel like they’re “working.” Professional trading often looks like doing nothing for extended periods, then acting decisively when probability stacks in your favor. It’s boring until it’s extremely profitable.

Consider the AUD/USD breakdown that happened in late 2022. The setup was building for weeks – China’s reopening story was failing, RBA was turning dovish, and commodities were rolling over. But the actual breakdown took time to develop. Traders who tried to front-run it got stopped out multiple times. Those who waited for confirmation caught a 400-pip move with minimal drawdown.

Right now, I’m seeing similar patience required for the USD short thesis. Dollar strength is looking increasingly hollow – supported more by European weakness and BoJ intervention fears than genuine USD fundamentals. But timing this turn requires waiting for either a clear Fed pivot signal or meaningful improvement in European growth dynamics. Neither is happening this week, so neither am I.

Building Systems That Include Inactivity

Your trading plan needs explicit rules for when NOT to trade. Mine includes market volatility filters, correlation breakdown indicators, and calendar awareness for high-impact event clusters. When VIX is above certain levels, when major pairs are moving more than 1% daily without clear directional bias, when we have three central bank meetings in one week – these are systematic signals to reduce position sizing or step aside entirely.

I also track my win rate and average trade duration during different market regimes. In trending environments, my average winner runs for 5-7 days. In choppy markets, even winning trades get stopped out within 24-48 hours. When I notice my average hold time dropping below two days, it’s usually a sign that I’m fighting the environment rather than adapting to it.

The hardest lesson in trading isn’t reading charts or understanding economics. It’s learning when your edge disappears and having the discipline to wait for it to return.