Trading success is not only characterized by knowing when to trade. Although good sense indicates that good timing of trades leads to better profits, knowing when not to trade may just be as important to one’s trading success. While most trading methods being developed today are based on when to make those timely trades, the vital element of knowing not to trade at all will seem just as significant for the savvy trader.

Common Instances

There are certain times when not trading may become the most viable decision to make. There are certain market conditions where even the best trading systems used won’t work at all. There are many times when the conditions either propose a losing result or one that will lead to a deep cut in profits. It is during such instances where not trading at all may prove to be the best bet, just for the sake of preserving the trader’s capital.

Importance Of Not Trading

Having the sense of knowing when not to trade can be very helpful for traders, especially in dire market conditions. When a market situation may present itself where a trading system is not working as planned, the best thing to do may be to stop trading anything. But unfortunately many optimistic novice traders would try to continue on trading in hopes of cutting their losses. But what usually happens is that their losses continue to mount with their ongoing trading activity. The losses may have been simply prevented by not trading until good market conditions allow for better trading results.

Knowing Your Trading System Well

Just like the usual trading decisions, ultimately deciding not to trade can also be based on how well one understands the trading system being used. An experienced trader knows the strengths as well as the weakness of the trading system he uses. With different trading systems providing different results given the same market conditions, having this insight will help traders achieve better profit results and prevent costly market losses. The decision not to trade and how effective it can be will depend on how well the trader sees the market conditions and how it may affect the trading system followed.