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Have you ever “fiddled” with a trade and then looked back later and wished that you hadn’t? So often we can get impatient with the market, expecting our move to happen today!
You can be correct on a turning date and get in right near the start of a move, but still have to wait 2 weeks before you see any profit. If you don’t believe me, go back and have a look at previous tops and bottoms in the market and watch the how the market worked its way higher or lower from these turns. Also practice trading out of these moves.
A current example, which I wrote about in last weeks Trading Tutors Newsletter is the double bottom on the US Dollar/Japanese Yen currency pair (FXUSJY in ProfitSource).
Chart 1 below shows that the Dollar/Yen has double bottomed on December 17th and January 21, at 87.14 and 87.13.
Chart 1
click to enlarge
Now a Double Bottom is a good sign of support in the market and it is reasonable to expect the Dollar/Yen to rise out of here.
However, taking a look at the chart, at time of writing (Wednesday February 4th) two weeks have gone past since the second bottom on January 21 and the market still hasn’t really gone anywhere.
This is where patience really comes into it. The trader who sits there and watches the market frequently during this period is likely to either close the position in fear or frustration, or add to the position in greed, “while I still can.”
Or, they sit and do nothing, getting more and more frustrated as time passes by with no profit to show for their efforts. This is not much fun for anyone.
A study of the Dollar/Yen and most markets in general will show you that often times you have to wait a few weeks before the markets take off. The low may hold, but there might not be much action in the meantime.
Chart 2 below shows the last major Double Bottom pattern that occurred at the end of 2004.
Chart 2
click to enlarge
Again, nearly two weeks had gone since the second bottom and yet the market was only 60 ticks up from the low.
The Dollar/Yen has a habit of taking its own sweet time to get ready, before racing off. Don’t worry if it’s taking its time – just sit back and let your trading plan work for you.
Otherwise, you may find yourself “fiddling” yourself out of a 1000+ point move, all because you lacked a little bit of patience.
Let the market tell its story, one day at a time, and don’t talk yourself out of trades just because they are a little sluggish.
Be Prepared!
Mathew Barnes
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