Happy Holidays to those of you in the states. I will be taking a few days off here but as always updating my trades on the site and answering questions that need immediate attention.
Man some of you are going to be coming here thinking, here we go the missing secret! Is it some cool entry I don’t know about?! What about an exit plan Mike! If only I knew how to exit my trades I would finally make it! Some cool new indicator(if this one is you we REALLY need to talk).
I wish, with all my heart I knew 15+ years ago this fact.
There is NO secret in trading. This isn’t a spoiler so don’t stop reading just yet! This is simply a reality check from my perspective after a LONG time at this and sharing my experiences.
If you are reading this and you are already a member please as you go through my material look how I apply the consistenty to my responses, trades I show you, and overall approach. Think about very closely why I do this? Try to think about how you can do this with your approach too.
Why do you think some can trade off their charts but others can’t? Do you think that those that have found success are hoarding some golden piece of information? They aren’t. Those that pretend to be are lying to you.
Charts are in many ways the easy part. Hang with me. Yes, you need to get the concepts down. Yes you need to learn support/resistance, price bar analysis, strong confluence areas, how to manage situations. You need too learn to really THINK about your charts. We have plenty of the technical stuff covered here. BUT, take a step back from the actual chart to think about what you are trying to do with your chart.
So what is the secret to trading ?
Most aspiring traders simply do not take a consistent approach to their method. They do not spend enough time putting together these concepts we use on our chart in a consistent manner. It’s one big wild ride each and every time out. Or, they spend 3 months trading one way, followed by 3 months trading another way.
Lemme explain to you from my method what consistency is. Ask yourself, do you do this? Why aren’t you doing this? Then try to think of ways to improve your consistency with your method.
These are just a FEW(and their are MANY) of the things I do each and every day to be consistent. Now remember things should also be flexible. So, on a case by case basis you want to apply your experience. That’s the beautiful part and the hard part about being a discretionary trader.
Yes I fully understand that what I am saying below involves charts. But, what I mean is how do you think about these parts to your trading?
- Entries – Each time I go to take a trade I always ask myself. Where is the entry closest to the most pivotal area on the chart? Meaning where is the point that makes the most sense and is most critical? This is the point I want to be a buyer. If we are talking about a price bar to trade like an outside bar you have 3 options. On a break, on a retrace, on the close of the bar. There is ALWAYS one that makes more sense than the other. Pick the right one consistently. Have you become consistent in your entry?
- Here is a simple chart on how to do that from my previous article on
- Practical tips to help struggling forex traders
- Exits – I think about where is the first place price should stall? What is my game plan if price goes there and stalls? What is my plan beyond that. Try to play out every scenario in my head and what I would do. Surprises can be highly curbed by doing this. Also your exits to the flip side of cutting out of the trade are as important if not more. Where should this trade not have to get past? What am I looking for to reduce my risk. One example is if I take a retrace entry I look for price to “turn” As it starts this turn and puts in a new swing we can tuck our stop under this area to help reduce our losses greatly. This flows into dynamic risk:reward topic. I think about all kinds of scenarios of my exit plan and how I will react to each. How have you tried to become consistent in your exit approach?
- Technicals/Trendlines/Support and resistance/etc – Stop using ridiculous looking trendlines. If it doesn’t line up nearly dead on the highs or lows I got rid of them. If they weren’t hit you in the face obvious, strip them off. Don’t draw a line at every S/R and assume you should trade it. Find a consistent way to draw and use them. For example I am very big with localizing support and resistance. If a Support or Resistance area hasn’t been confirmed in a long time I prefer to almost always only look for false breakouts there. Does that mean every time it gives a false breakout? Heck no. But again we are trying to be consistent. How are you being consistent with the tools you are trying to learn?
- Risk Reward – This is a dynamic subject. You should always be looking to reduce your risk when a trade NO longer makes sense. There are many ways to do this. Remember just because you start with your stop in one place and your exit in another doesn’t mean that is your R:R. It is dynamic as a trade progresses. This is fantastic if you watch your CRITICAL areas to begin to reduce risk or cut out of a trade. Understanding how to integrate your entries with your exits. Are you really understanding your true risk:reward? Have you thought about your profit fact? Does every entry you take mean you stick a randome exit so you get a specific R:R cause people say you should? Try thinking about your avg loser vs your avg winner. That’s a number worth looking at.
- Position Sizing – Understanding what risk to use is critical for me. A trade that is taken that has LESS room to manage gets less risk because I have less of a chance to cut out of this trade. A simple example is if I take a trade on a deep retrace of the bar I will use half my normal risk. A trade taken on a break of the bar should have MORE room to cut out and thus I can use my full risk. This plays a CRITICAL role into smoothing out the equity curve for me. How many of you have thought about the impact the % risk you pick for your trades has. Are all your trades exactly the same? What role and impact do winners and losers have on your overall equity curve?
- Drawdown– How do you trade through your drawdown? Do you start to change or sway from your normal activities. Do you understand that drawdowns are inevitable and normal at that you MUST stick to what you know works and weather the storm? What I do is simply try to tighten up the amount of trades I take. I try to re-focus and just be even more picky on sticking my entries and cutting out of my losses. Once things start to fall my way more consistently I am more comfortable getting involved. I think of it like when I used to play poker. If you are running hot you play more hands and feel more in tune. When you are struggling it’s best to tighten the belt a bit. Do you consistently know how to deal with your drawdowns?
The above are just a few of the many many topics that I look to be consistent at. This means you have put a lot of time and thought and validated these thoughts with data. If you haven’t begun to try to be consistent yet in your trading you will never find success. You will hop from one things to the next, have a few good months followed by misery. Rinse and repeat over and over, for years and years. When you decide to really dig into how to be consistent, trade through the goods and bads, and rinse and repeat a consistent method, then you will start to see the light.
Wishing those that celebrate a very Happy Thanksgiving!