Warrior Trading Blog

A Different Perspective About Liquidity


As day traders, we begin and we close our daily activity with no open positions. By definition, there is no room for holding anything in the portfolio overnight. A common mistake that newbie traders use to make is to break this one rule once a trade is not collaborating.

The huge problem with this approach is that risk management requirements are no more respected into the “hold-and-hope” approach. So, getting rid of this bad habit is vital for day traders whom are looking to turn it into a profession.

So, being liquid simply means having the cash power to potentially enter into a new trade. So, in order to maintain composure and be able to sit tight and wait on the sideline when the market is not collaborating is a key ingredient of every successful trader (read more about the importance of being selective here). But, over here, I want to offer a different key for reading about “liquidity”.

In chemistry, a liquid is one of the states of matter. The particles in a liquid are free to flow, so while a liquid has a definite volume, it does not have a definite shape. Apparently, this definition has nothing to do with liquidity in trading but I rather believe this isn’t true.

Being liquid means self-adaptive

Into trading, being liquid is a strong ability to adapt to your own emotional state and to the overall market condition in order to fill the shape that has the most chances to turn out profitably. This includes the strategies, exposure and everything in between. Being able to recognize when the market is strong to comfortably being aggressive in sizing is as important as the exact opposite.

Personally, during the latest three trading days, I’ve only had a single trade, which is kind of annoying of one hand. On the other hand, it gives to myself the confidence about the fact that I’ve been adapting very well to the surrounding market conditions.

Now, all I have to do is keep having faith into the process, knowing that once momentum will get back, it will find me ready to step up into the game more confidently than ever.

“The measure of intelligence is the ability to change.” -Albert Einstein

See you in chat-room.

Trade safe,

Roberto Barbaro