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Yes, Give it to me

Why Waiting for the Best Trading Setups is Destroying Your Profitability 

Last Updated: October 29, 2019

By Rayner

So, you’re waiting for the best trading setups.

For example…

Price is in an uptrend, moving averages are sloping higher, comes into area of support, RSI is oversold, MACD ticks up, and a bullish hammer is formed.

BAM. Finally, you take the trade.

But here’s the thing:

If you only take the best trading setups, you’ll be leaving money on the table.

I’ll explain why and share with you what you should do instead — to increase your trading profitability.

Watch this training video below:

I hope you’ve enjoyed this week’s video post. As always, comments are welcomed and encouraged. Cheers!

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  • Good point. A similar argument (low number of opportunities) could be made against trading higher time-frames, as for instance weekly – Peter Brandt being a big advocate of those.

    Rayner, couldn’t figure out, what is that black circle in front of your microphone ?

    • Hi Vlad,

      I believe Peter takes about 2-3 trades a week on average. Doing about 150-200 trades a year. That’s based on what I read in his book ‘Diary of a professional commodity trader’.

      The black thing is actually a filter that prevents the ‘popping’ sound from my mic. I’m sure you’ve heard sound that has the annoying pop sound, what the black thing does it to reduce it.

      Rayner

  • Hi Rayner
    I suppose this strategy works specifically for range trading? Because as you said a trend trader you don’t set targets.

    Unless you have two separate accounts? One for range trading and one for trend trading?

    • Hello Andrew,

      I’m not referring to any strategy here but rather the principle behind taking only the ‘best’ trading setups.

      To answer your question, I do take shorter swing trades in the market apart from trend following.

      Let me know if that answers your question 🙂

      Rayner

  • hi Rayner, I m not agreeing nor disagreeing with getting more decent trades. however taking more trades would let u incur much more cost of trading over the long term. let’s say for example one trade buy/sell will cost you $20. 200 trades could easily cost your $4000 per year .

    • Hi Kom,

      Yes you make a good point. This is where you’ll have to factor in your transaction cost against the profits you make.

      With larger account size, the transaction cost as a % tends to decrease compared to small accounts size.

      Rayner

  • Rayner

    These are excellent videos. This one particularly resonates. I guessed exactly what you were going to say re ‘frequency’ because this is a dilemma with which I have wrestled. It reminds me of a story recounted by Frank Bettger in his book ‘How I raised myself from failure to success in selling’ where he tells to the story about a famous hitter in baseball who was brilliant but had a habit of waiting for the perfect ball. He pulled the crowds in and when it came off it was something to behold but on closer scrutiny, his averages were below par. My solution is to operate in different timescales and run a trend in the background with closer attention to swings as and when they pop up.

    KInd regards

    Martin

    PS – That haircut kills me!

  • Hi Rayner,

    I found that you always set your stop loss at 2 ATR.
    For people who has less capital, e.g. < SGD2000, do you think it is suitable to run your strategy?
    Also, do you think your strategy could be applied to shorter time frame? e.g. 4H and 1H? (to reduce the stop loss)

    Thanks a lot.

    • Hi Wilson,

      Yes it’s possible but you need to reduce your position size accordingly.

      If you’re entering off the 4 hour chart, your ATR should be based on the 4 hour. Not the time frame lower.

      You can watch this video here on how to manage your position size.

      Let me know if it helps 🙂

      Rayner

  • Hi Rayner

    Thanks for posting these great videos!

    So here’s the question:
    Increasing your trade frequency to find more decent setups is certainly a priority. In your book “The ultimate guide to trend following”, you also warned traders to look for uncorrelated trades.

    So, if I find more than one decent setup for the same currency, eg. 4 decent setups for pairs containing GBP. Do I only have to choose one currency pair among the four, the one which I think will be the best and reject the others?

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