Today's Quote: “To take no action is an action.” Ancient Chinese Proverb

There are several good books out there about trading that should be on every trader’s must read list. If you were forced to choose one and only one, the only possible pick would be “Tools and Tactics for the Master Day Trader”. We are going to run a series of excerpts from the best selling book for the next series of lessons. Now in the words of the master trader himself, Oliver L. Velez…

WHEN NO ACTION IS THE BEST ACTION …

When addressing the importance of thought as well as action during the 1960s war protests, Daniel Berrigan's frequent cry was, "Don't just do something, stand there." While short and obviously concise, this quote is power packed with a great deal of wisdom. It is very apparent that we, as human beings, are creatures of action, or at least we strive to be. The individual who strives, achieves, accomplishes, and does is idolized in our society. The "doer," the person of action, has always been treated kindly by history. And while action or doing holds great importance, we must never lose sight of the need for balance. If action is important, then a balanced existence calls for periods of inaction. In fact, I have found that the quality of my periods of action are often determined by the quality of the preceding periods of inaction. And so it is with my trading…

When the market gets quiet and low-risk opportunities are scarce, these traders who feel they always need to be in something start forcing trades, as if they could force the market to cough up favorable conditions. These same traders don't realize that sometimes the very best action is no action. They fail to grasp the fact that standing still, at times, brings in a much-needed rush of calm and clarity. The moments during which the market enters into a lull offer us the chance to regroup and recollect ourselves. They help us regain our composure, grease our wheels, so to speak, so that we are prepared for the next period that calls for quick-rolling action. I've learned to respect the need for just standing still. I have learned how to use inaction as a means of preparing for the ultimate action. Ralph Waldo Emerson once said, "Do the thing, and you-will have the power." This is so true. But he failed to tell us that standing still from time to time will help us keep the power. Be an active trader, please. But realize that, at times, just standing still helps.

Standing still will, at times, be the most productive action we can take. Sometimes, it will be in the quite periods of action that we find our balance. Mental clarity often returns when we have dropped all action to become an unbiased observer. We, as traders, need to recognize our need for these periods. Being involved in the struggle has its place, but we also need periods of non-struggle, if only to rest our faculties and rejuvenate our senses. Each time we step back or bow out of the market to observe, cue seem to come back more powerful. The next time the market is not cooperative, or something in the air seems wrong, stand still. Watch how no action will bring about a greater feel for what your next action should be.