Now after we talked about managing psychological risk in trading, now I will give you another key in trading, which is to know when NOT to trade.
Sometimes traders loose control because it is too hard to make some money, leading to overtrading. Mostly, this can be caused by the market condition changes, which is a challenge to adapt to. So as I told you in the previous post, the particular trader tends to trade for psychological reasons, not for logical reasons. There’s a big chance that this trader can reduce their own win rate, for example from 55% to 45% when overtrading.
So here’s the key: traders should limit their daily losses, and take some time out. Without limits on daily losses and a process for taking a time out, that trader can blow up in a short amount of time.
Let’s start to talk about the changes of the market, shall we? Market conditions change periodically, one’s edge in trading is never fixed. We go through periods of greater or lesser edge. For that reason, a central skill to long-term success is recognizing when your edge is eroding and pulling back from risk taking.
Now the example part. In the 2005 and 2006, there were low volatility and traders who did not adapt to those conditions and reduce their profit expectations (per trade, as well as per week and per year) fell down before the better condition in 2007 and 2008. Another example is the technology boom in the late 1990s. Many daytraders who were successful that time failed after early 2000 and lost their money and their trading careers.
The takeaway message is that successful traders are always students of markets, always learning, and always adapting. They have periods of feast and famine, and they learn to keep themselves afloat during the lean times so that they can participate when things get better. In that context, learning when to not trade is a crucial component of trading success.
Hope this help and please do leave some comments to let me know what you think 
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