One of the most important skills for any trader is the patience to wait for ideal setups.
I talk about this all the time and for a good reason. Being selective with your trades is one of the greatest virtues you can possess as a trader.
However, as strange as it may sound, too much patience can actually be a bad thing. It’s a double-edged sword…
If you’re in a trade and being too patient — waiting for the setup to play out exactly as you expect — you could miss crucial technical indicators telling you to exit the play entirely.
For traders, there’s a fine line between patience and stubbornness. I’m a living example of this problem…
Am I patient when selecting trades to enter? Yes. But that same pre-trade patience sometimes leads to stubbornness once I’m actively in the position.
Yesterday, I closed out a poor trade (for a loss) that’s a perfect example of my being too stubborn.
Keep reading and I’ll break down a few of my recent mistakes (so you can hopefully avoid them yourself)…
My Recent Big-Tech Trades
First, let’s talk about how patience can pay off. It all comes down to being selective with your trades…
Over the past few weeks, I’ve been watching one stock closer than any other…
Can you guess it? That’s right … I’m talking about Nvidia Corporation (NASDAQ: NVDA).
NVDA is the most overbought blue-chip stock in the entire market — up 130%+ in the past six months.
But over the past two weeks, the semiconductor giant has finally started to show signs of slowing down.
I knew I wanted to trade puts on NVDA … but I needed to be patient. And soon enough, I got the confirmation I was looking for…
On April 12, after hitting strong resistance at $277, NVDA failed to crack the level. That’s when I bought my first batch of puts … 4/14/2023 expiration at the $275 strike.
I held these puts overnight and sold them the next day for a 50% profit. (To read my full trade breakdown, click here.)
I probably should’ve packed it in and moved onto another chart at that point, but I thought it was likely that NVDA would drop further.
So, yesterday, I bought another batch of NVDA puts … 4/21/2023 expiration at the same strike, $275 for $2.72.
But this time, the trade didn’t go according to my game plan…
NVDA looked strong in the morning, but I expected this bounce to get taken out near the $277 resistance.
However, the dips were small and kept getting bought up. I should’ve immediately cut this position early in the morning, but I wanted to be patient.
Instead, my patience ended up doing me a disservice. I held the contracts for too long, even after NVDA was getting close to cracking resistance.
I ended up selling the puts just under four hours later for $1.70 — a loss of 37%.
Am I beating myself up over this regrettable play? No. Rather, I’m identifying my mistakes so that I won’t make them again…
How Patience Can Lead to Stubbornness
Circling back, this trade is a great example of how patience can lead to stubbornness.
I was patient in selecting this trade, but too stubborn to cut it at the right moment once I was in it.
If you want to have any chance of winning in the stock market, you must be ready to adjust your strategy WHENEVER necessary.
In other words, you must be nimble … ready to shift your setups, your patterns — and most of all, your mindset — any time the market changes pace.
Trust me, this is a lot easier said than done.
I’m probably one of the more stubborn traders you’ll come across. Sometimes, this causes me to drop money in unnecessary trades (like this one) because I refuse to accept that the chart is moving against me.
But the truth is, trades rarely go exactly according to your plan.
This is why you must expect the unexpected and always have a backup plan.
If you’re in a trade with bullish positioning, make sure you wouldn’t get obliterated if the chart came crashing down quickly. And vice versa.
Additionally, if the technical indicators are telling you that your initial thesis was wrong, don’t stubbornly hold onto a losing position.
Instead, cut the loss and move on, just like I did yesterday.
We can’t win ‘em all, Evolvers!
Taking losses is an unavoidable part of trading.
The key is to keep your losses small and learn from your mistakes.