There's a big difference in just sitting on your hands and not trading from that of taking a pause in your trading. It's important that you understand that difference so you don't lose your edge, that intuitive view of the market we develop over time with experience.

Of note is that to this post, I have a companion video of the same title: Pausing FOREX Trading VS Sitting On Your Hands that puts all of this together from a different view point.

If you've come from watching that video, then press on here. However, if this is your starting point, I might suggest that you read through this before watching the video. Or, if you want, you can skip to the bottom of this post to watch that video now.

But I measured several places in the backyard that were 2 feet! Amazingly, some of the towns around us at lower elevations only got around 4 inches. Big difference!

The storm raged through all of Saturday night and into mid Sunday. We had 2 transformers near the house blow up Saturday night around 10:00 pm. That was a spectacular sight, if you've never seen that. Scary....

However, by mid day on Sunday, the sun had burst through the still dark cloudy sky. I was out shoveling for 4 hours, and came in a hurtin' unit for sure.

I got a fire going in the wood stove, and just sat down with a cup of coffee to finish reading Jack Schwager's Unknown Market Wizards. It had been a long day....

I just put a "pause" on everything, and relaxed on the sofa with coffee in one hand, and the book in my other.

Well, I did a video Sitting On Your Hands Is Still Trading that discusses this in relationship to what legendary speculator Jesse Livermore once said:

"It never was my thinking that made big money for me. It was always my sitting."
— Jesse Livermore

Too often we almost feel guilty if we're not hitting the order button to place a trade.

In another of my videos Don’t Make Anticipatory FOREX Trades I discuss this tendency from the standpoint of FOMO (fear of missing out) as a perfect time to just "sit on your hands".

So, it's appropriate to just "sit on your hands" until a real trade entry presents itself. You might have to do that for a few days, or even weeks if you're a long term trader.

But pausing in your trading is different.

When you pause, you actually make a choice to just stop trading for awhile. You might do this, for example, after suffering one of those probabilistic long series of losses we all go through from time to time. A pause is for an indefinite period of time, unlike the shorter "sitting on your hands".

A pause is not done against something, but rather for something.

You might wonder if the example I gave of laying off trading for awhile after suffering a series of losses isn't pausing against those bad beats. It's really not. Rather, in such a case, the pause is simply to give you time for clarity; a time to rest.

A pause could be as simple as just having other things that you want to do. Trading takes a lot of energy, and mind focus. You need to step back from the trading desk and screens every now and then to do... just nothing for awhile.

If that thought or word ever crosses your mind, then trading is not for you. Save yourself unnecessary grief, and the "weeping and gnashing of teeth", and just close your account. Take the money and open a gym membership, or buy a set of golf clubs.

But don't kid yourself with an attitude like that, that you're going to sit back down at the trading desk, and make it as a trader. You're just a whiner like Michael Douglas as Gordon Gekko in the movie Wall Street: Money Never Sleeps says:

"Hey, stay positive pal. Most people, they lose, they whine and quit. But you got to be there for the turns. Everybody's got good luck, everybody's got bad luck. Don't run when you lose. Don't whine when it hurts. It's like the first grade, Jerry. Nobody likes a cry-baby."

Because the time frame in real estate is so vast in comparison to trading, the signs of blow off periods that will obviously lead to severe contractions in the market are easily read if you know what signs you are looking for.

I was fortunate when I began my investing. The economy was just beginning to to come out of the huge 1973 recession and oil crisis. Current owners who had purchased at the top of the market, and had seen their equity evaporate in just months were eager to get out of their properties.

For example, I purchased a 4 unit apartment building owned by an out of town airline pilot. He had bought the property just because he could, knew relatively little about real estate, and had turned the operations of the building over to a local property management company.

Because of his inattention to the property, there were many issues with the building that enabled me to get the price down. Within just a few months I created a positive cash flow out of the building equal to over 25% per year against my acquisition costs. In just 4 years the net rental income alone returned all of my investment so I had a zero cost basis. And, as a bonus, the building had appreciated at around an average of 11% per year.

That was great, but as we approached the late 1980s prices were just going crazy. My entire portfolio was only 39% leveraged, and so I was in great shape. However, because I took the time to study conditions, I pushed back from the table to pause everything. I did not like what I saw happening in the markets.

And then a combination of the 1990 oil price shock, enormous debt accumulation of the 1980s (much of it real estate), and growing consumer pessimism combined with the weakened economy threw the country into a brief, but massive recessionary pitch over the cliff.

By 1992, though I had lost a Million Dollar net worth, I didn't lose any of my assets. Even though I had reduced rents across the board, all of my properties were still throwing off positive cash flow. That ended up being critical as, like many, I lost my job during that period. It would take me 9 months to find another.

In real estate, you've got time to determine that conditions are changing, and to figure out your risk management. In trading, you simply do not have this time. You must, therefore, construct a risk management plan which accounts for so-called 'Black Swan' events because there are no such events.

These events are predictable because you can look back over time, determine the probabilistic standard deviation of these types of events, and thus have that precious time to include them into your contingency risk management plan.

You might be interested in a couple of discussions I've done concerning the topic: Probability Analysis In FOREX Trading. You can read an analytical approach to this in my blog post of that title, as well as a more descriptive video that I did.

Video: Pausing FOREX Trading VS Sitting On Your Hands