‘Why’ Are You Trading?

2021-11-10

One of the most beneficial and difficult traits to understand and learn about trading is the need to wait.

However the market may act, no trader can put in “hard work” and change its direction for a more likable outcome. Waiting out the market or major news events that are perceived to affect the market is a disciplined skill applied by veteran traders.

But waiting is hard to do sometimes. Traders are people with a desire to get things done, so not doing anything is a difficult task.

When waiting is appropriate, traders can make use of this time by contemplating an important question, “Why are you a trader?”

A starting point to answer this question is to define your money management strategies, your risk tolerance, and applying a method to track your work. How much capital will you free up for your trading account? What percentage or maximum are you willing to risk? Which trading setups will you apply? How will you track all your trades?

Answering these questions helps you better understand your “why” for trading. This can give you a point of reference to follow as you grow and improve as a trader.

Some more points to consider when developing your “why” include:

  • What are your immediate and long-term goals?
  • What securities will you trade? Stocks, options, futures? Just one or a combination?
  • What setups will you use? How can you learn more about these setups?
  • How can you grow your account with precise entries and exits on your trades?

Answering just a few key questions like these can help you quickly develop and understand your “why.”

When the market gets rough you’ll be able to focus on a plan to follow and when it’s time to wait out the market you’ll have a point of reference for adjusting according to the action in the market.