When not to trade: Key situations better to avoid

When not to trade: Key situations better to avoid

Not every moment is suitable for entering the market. There are specific situations that can increase risk and reduce a trader’s chances of success. Recognising these moments and avoiding trading during such times is a necessary part of discipline and success in trading.

Below are three key situations when you should avoid trading:

 

1. During major economic news

Major economic news and events like central bank interest rate decisions, economic results (e.g., NFP in the USA), or unexpected political events, can cause intense market volatility. During these periods, price movements are often sudden and unpredictable, meaning that even experienced traders may struggle to spot proper trading opportunities.

 

2. Trading out of boredom

Trading out of boredom or from a desire for action is very dangerous. Many traders are tempted by the idea that they must always be in a trade, otherwise, they would “miss something”.This approach can lead to frequent losses, as traders often find themselves in situations where there are no clear trading opportunities.Why should you avoid trading out of boredom? It  leads to emotional decisions. When trading out of boredom, you may start making trades with no rational basis (trading plan).

 

3. Trading after losses (“Revenge Trading”)

Another dangerous moment to trade is trading shortly after suffering a loss. Many traders fall into “revenge trading” – trying to recover their losses as quickly as possible. This impulse is dangerous because it can result in irresponsible trades that are emotionally driven rather than rationally based.