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In today’s episode, you’ll discover simple tweaks that will boost your trading results quickly.
So tune in now…
Resources
High Probability Trading Strategy — A Complete Guide
The Moving Average Trading Strategy Guide
Support and Resistance Trading Strategy — The Advanced Guide
The Trend Trading Strategy Guide
The Complete Guide to Stop Loss Order
How to Create a Trading Journal and Find Your Edge in the Markets
Transcript
Hey, hey what’s up my friend! In today’s episode, I’ll be sharing with you simple tweaks that you can make to your trading (to get results fast).
Let’s get started.
1. Trade from an area of value
Now, what do I mean by this? Let’s say the market is in an uptrend, then where is an area of value? Well, it could be at support or at a respected moving average. Likewise, just because the market is in a downtrend, doesn’t mean you look to sell immediately.
Let the price come to an area of value, like resistance, swing high, moving average or trend channels, before you take on a trade.
I know this sounds simple, but why don’t traders do it? Because they don’t have the patience, they just want to trade and they want the action now. They don’t want to wait and that’s why they lose consistently.
So number one, trade from an area of value.
2. Trade with the trend
Because why would you want to fight against the trend? The trend is your friend. You’ve heard this probably a gazillion times. And again, why do traders want to trade against the trend? It’s because they think that the market can’t go any higher.
They think the market is too high and too bullish, it can’t go any higher. Then poof! The next day it goes up another 100 or 200 pips. So really, if the market has been moving higher steadily over the last 3 months, then the sensible thing to do is to expect it to continue moving higher.
But most traders want to fight the trend, thinking that’s too high, it can’t go any higher. So they end up losing money.
Let me share with you a very simple guideline. If you want to define the trend, then just pull out the 200-period moving average, on the timeframe you’re on, be it the daily, the 5-minute or 1-hour.
If the price is above the 200-period moving average, then you’ll only look for buying opportunities, you won’t even consider selling. And likewise, if the price is below the 200-period moving average, then you’ll only look for selling opportunities and won’t consider buying.
Of course, this is not foolproof. But it should keep you on the side of the trend more often than not. This is just a very simple guideline for those of you who are struggling to define the trend.
Next…
3. Have a proper stop loss
You can’t just put on a trade and put in a random 35 pips stop loss simply because that’s a nice number or that’s how much money left in your account, etc., it doesn’t make sense.
The market doesn’t care how much money is left in your account. It goes where it wants to go and you’ve got to respect the market. 35 pips might be reasonable for someone trading on the 15-minute timeframe.
But if you trade on the daily timeframe, then that’s too little. You’ll likely get stopped out from the noise in the market.
So how do you set a proper stop loss? Let me share with you the simplest one.
Look at the nearest price structure for whichever timeframe that you’re looking at. So let’s say you’ve bought in an uptrend. The nearest price structure could be a swing low or a support, which you can then set your stop loss below it.
Why? Because this price structure will act as a barrier to help you hold up the prior prices. If the price makes a pullback, then this area of support could be an obstacle where the price will have difficulty breaking below it.
You’re using the natural price structure of the market to make it difficult for the price to hit your stop loss.
If it’s in an uptrend, set your stop loss a distance below the swing low or a distance below support. If it’s in a downtrend, set your stop loss a distance above resistance or the swing high.
Make the market work hard to reach your stop loss. Don’t set it randomly, 5, 10 or 20 pips based on how you feel, or how much money is left in your account, because it doesn’t make sense.
Moving on…
4. Have a target
Let’s say you’re a swing trader, do you just randomly set a 50 or 75 pips target because it’s a nice? No, of course not. Again, as a swing trader, or as for most discretionary traders, your target is usually at a level on the chart where the market might turn against you.
Let’s say you bought at support. Where do you think the market will turn against you when it starts heading higher? Resistance is an area on the chart where the price could turn against you.
As a swing trader, you want to exit your trade before resistance which is before the market reverses against you. The last thing you want to do is to set your targets above resistance or whatever random 200, 300 pips, or a target which doesn’t make sense. Again, have a target that actually makes sense.
And finally…
5. Have a trading journal
I know you’re thinking, “Argh, not this again!” But this is important.
Because when you have a trading journal, you can record down your trades and find out which trading setups are the ones that are making you money. Is it your breakout trades? Is it your false break setup? Is it the counter-trend trades?
Then you’ll also know which are the ones that are causing you to lose money, then what you need to do is to simply focus on the setups that are making you money and stop trading those setups that are costing you money. It’s simple. And that’s why having a trading journal is powerful.
But most traders, will not do it because it’s hard work, it’s dry, it’s boring. And that’s why again, most traders never succeed.
Here’s a quick recap…
Recap
- Trade from an area of value
- Trade with the trend
- Have a stop loss that makes sense
- Have a target that makes sense
- Have a trading journal
With that said, I wish you good luck and good trading. I’ll talk to you soon.