If you’re struggling with trading and have tried every trading strategy on the market with dismal results, read on as I’ve got 3 tips to help you transform your trading P/L from red to black.
Over the years, one of things that I that I have done right is avoiding chasing each new bright and shiny object (trading strategy), but instead have stuck to my core trading strategies and have worked on improving what I call “soft” trading skills.
This has paid off and has resulted in me doing something that few traders ever accomplish — consistent, profitable trading.
Here are 3 tips to help you make the transition into profitable trading.
Although the EURUSD may be your favorite pair to trade, take a good hard look at the pair over the past 6 months and pick a day that the EURUSD is consolidating (excluding year end). Then flip through 20 other pairs and make note of which pairs were trending on that day.
Oftentimes, while one pair is consolidating another is trending.
A great example, was during the Labor Day holiday in the US. In between the evening of Sunday, September 6th and the afternoon of Monday, September 7th the EURUSD was mostly consolidating.
While this was occurring, I was racking up major pips (hundreds) trading GBP pairs. And when I say hundreds of pips, I mean from the entry price to the exit price — and not a 20 pip move for which I entered 30 orders.
At any given time, I am almost always trading multiple pairs with a goal of trading a minimum of 5 pairs concurrently.
The benefit of doing this is that it increases my odds of ending each week in profit, which is what we all aim to accomplish, right. Look at this way, instead of stressing over one pair that was in profit and has moved against you, it’s much easier to wait and see if that move against you is simply a retracement when you have 4 other pairs that are in profit. You stack the odds in your favor when you spread your trades over multiple pairs. This is the same mindset that people have when they purchase multiple lottery or raffle tickets — it increases their odds of winning.
What gets measured gets managed. And this applies to trading as well. Keep a log of each trade that you take and use this log as an educational tool.
For me personally, I like to focus on my losing trades. Over the weekend, I sit down and review the trades that I took during the week. I assess if I am consistently following my trading rules.
If I lose a trade, but followed my trading plan then I’m happy with my performance, but if I find that I am not following my trading plan then I have to figure out why and what actions I need to take to get back on track.
Years ago, I realized that I was getting into winning trades, setting a profit target, but then closing out my trades prematurely. My trading log showed that my profit targets were hit in most cases, so I gradually dropped that bad habit and formed a good habit of leaving my trades alone and checking them every 4-8 hours or when my audible alert is triggered.
Backtest Trading Strategies
This final tip is one of my favorites. In fact, most of my trading time is spent as follows (30-40% backtesting, 40-50% analyzing the market, 20% managing active trades).
If I had to attribute one single thing to my success in trading in just a few years — it is my habit of backtesting my trading strategies and reviewing my past trades .
This single habit has helped me to gain the confidence that my current strategy (price action and using support resistance levels) results in profitable trades for me most of the time.
Each weekend, develop a habit of doing the following:
- Identify your trading strategy
- Open a chart of of favorite forex pair showing 6-12 months of history
- Starting at the hard right edge of your screen, slowly scroll through the charts asking yourself prior to each candle the following:
- Where’s my entry, profit target and stop loss?
- If you have already entered an “imaginary” trade, ask yourself at each candle, if price has confirmed your trade direction, or appears to be reversing. Work on getting good at looking for evidence that your trading bias is valid or invalid.
In my opinion, one of the best things that you can do to improve your trading results is to develop your trading “soft” skills. These are the skills that surround your live trading activity, such as money management and risk management.
I challenge you to focus on these 3 areas of improvement for 30 days and let me know your results in the comment section below.