This forgotten trading position could make the difference between you being a successful trader or a dismal failure…
I'm always amazed when I speak to traders and they tell me how difficult the market is.
It's not because I don't believe the market can be tough to trade, but it's because when I ask them what they're doing in the market, they'll tell me they're sitting long of share XYZ or short of share ABC.
My point is, these traders are quick to complain when they lose money in the markets; but they forget there are three positions when it comes to trading. And the most often forgotten one is the most important when the markets get tough to trade. In fact, it could be the difference between you being a successful trader or not.
So what is this third and forgotten trading position?
You don’t need to make money to be in a better financial position
When you look at the different trading positions the most obvious is the long position. This is simply when a trader buys shares in the market. This is the perfect strategy to make money when markets are rising.
The second is the short position. Now holding a short position refers to the trading technique of selling shares you don’t yet own and trying to buy them back later at a lower price. This is the perfect way to make money in falling markets.
And the third position is a square position. This means a trader is sitting without a position. You’re not long or short. And this is the perfect position when you don’t know where the market is going.
Now, I know right now you’re thinking, “Warren, that’s obvious. Why are you telling me about not holding a position?”
And yes it is obvious when you think about it. Yet it is one of the hardest things for traders to do.
Traders will complain about how impossible it is to make money in a market; they’ll tell me how they just keep losing money; but they won’t for a second think about not trading until they know where the market is heading.
The result is they continue to lose money. And they end up being worse off than if they had just done nothing.
Resist the temptation of trading for the sake of it
This is the best way to improve your success as a trader. If you can avoid trading for the sake of it, you can cut down on those ‘iffy’ trades.
And doing this will reduce the gamble you take when you trade for no good reason, other than you wanting to be involved in the market.
You need to realise that the only reason traders want to always be long or short is because they are afraid to miss out on a move in the market.
But it is better to miss out on a move that would’ve gone against you than to be in it losing money.
So don’t be afraid of the third position of trading. By holding a square position, you can save yourself money and heartache. And best of all, you’ll be better prepared to get into and profit from moves in the market when they do actually happen.
To learn more about how I can help you become a successful trader, be sure to visit my Capital Wave Trader
service by clicking here
Until next time,
Here’s to staying ahead of the game.