The concept of patience is a virtue that has been around since the 1300s when it was first mentioned by the great English poet William Langland. Fast forward some seven centuries later, and patience still remains one of the defining factors for achieving success in any endeavor.
Forex trading is a combination of numerous technical and analytical skills. However, patience is the underpinning element tying it all together, and without it, the road to consistency becomes more burdensome.
The forex market does appear like a sea of opportunities to the uninformed investor. Yet, we know that being profitable is about only taking the absolute best setups and leaving those deemed as sub-par.
Patience is what ultimately allows traders to find the best quality opportunities instead of focusing on the quantity of these. So, let’s explore why this characteristic is the most crucial to possess as a trader.
Why time is your best friend in the forex markets
Forex trading analysts often need to internalize huge amounts of data. However, what traders are purely dealing with is time. When we see what we believe is an opportunity to buy or sell a currency pair, we need time to evaluate whether the signal is truly reliable or not.
Even when a trader takes a loss, it doesn’t make any logical sense to jump back into another position immediately. A waiting period of a few hours, a day or a week, has to occur for re-evaluation to maintain consistent and fruitful decision-making going forward.
Let’s also consider that forex isn’t a particularly volatile instrument, meaning most ‘big moves’ happen over several days or longer. The FX market can be fast-paced with many ‘whipsaws.’
In a minute, a candle may appear to be bullish, and in the next minute, a whole new reversal is underway. All big moves in any market often begin with occasions where price seemed to be going one way but ends up going the other.
Essentially, time is what allows you not to fall into certain impulsive, emotional traps such as revenge trading, closing positions prematurely, and overtrading.
It’s an element where you can add that extra important bit of confirmation, which is achieved through patience. Naturally, traders are highly inquisitive and don’t take everything at face value.
The relationship between patience and the zero-sum game concept
Most experts agree that nearly all financial markets are zero-sum games. This game theory concept states that one participant’s gains are equivalent to another’s loss, resulting in a net wealth change of zero.
Put simply, for any group of winning traders, a group of losing traders needs to exist. Whenever you make a profit, it’s because primarily you’ve picked the price direction better than the other participants at that time.
We should always keep in mind that statistics say over 90% of retail traders lose money in the markets. Many reasons exist as to why the figure is incredibly high, but one is because many traders are naturally impatient and seek instant gratification.
Therefore, part of being skilled in this game is adopting a hard skill like patience to have an edge against your ‘opponents,’ so to speak. Humans are always wired to put pleasure over pain.
Acquiring patience is a mentally challenging trait to harness. However, mastering this hard bit will set you apart from the rest.
Examples of where patience can immensely help you in forex
Let’s dive into concrete examples where patience can be highly beneficial in your trading.
Switching from a short to long-term trading style
We classify traders in forex as scalpers, day traders, swing traders, and position traders. Each style has its advantages and disadvantages. Scalping and day trading may provide you with more opportunities to make money, but these methods are time-consuming.
Taking the more patience-based approaches of swing trading provides some unique benefits. Although the trade execution is far less frequent, the depth of the movements targeted is greater, meaning more profits.
By being more patient, you don’t need to commit as much screen time as a typical scalper or day trader does. This provides you with immense psychological and physical relief, giving you the opportunity to live a life outside of the charts.
The patient factor with a long-term trading style allows for this freedom, and you can carefully plan your trades well in advance without any rush.
Growing your account
You can either attempt to grow your account aggressively using excessive leverage or take the slower, patient approach. By having more patience, you take smaller risks, which will not hurt you financially.
Appreciating the long, time-based process will help you build healthier habits and build your account more steadily over time rather than ‘aiming for the jackpot’ earlier on and risk losing your entire account.
The difference in waiting that extra 15 minutes, an hour, or even a day can allow you to gain far better entries with bigger position sizes and tighter stop loss.
Some strategies require this waiting period to reduce the number of losing trades or just gain a more optimal entry. Having patience can certainly help in this regard.
Mastering the craft
Lastly, being highly skilled as a forex trader is similar to attaining a three or four-year degree. It can take several years to arrive at a point of mastery in this game, as trading is a craft only harnessed through time and experience.
Patience will allow you to get through numerous learning phases of making countless mistakes and reiterating different things.
When we really think of trading forex, it’s more akin to watching paint dry or the ‘art of doing nothing most of the time.’ The activity is rarely as exciting as what many might believe it is initially.
If we compare it another way, trading shares similarities with fishing. Although many fish in the sea exists, it’s not necessary to catch each one. Any skilled fishermen will observe many variables before casting their bait into the waters.
By the time this happens, there’s a high chance of catching the best quality of fish. Such an approach is what every successful FX trader adopts, and patience is the glue tying it all together.