How To Win At Trading
The inspiration for this article came from the famous football coach Vince Lombardi.
Put your faith in the basics. You don’t have to have great entries and exits but you do have to have good money management. Good money management will win more often than not and preserve capital. Every trade boils down to doing the things you do best and doing them over and over again. So it is doing the basics and repetition of the basics over and over again without making mistakes that makes for the win. There are only 5 or 6 big trades a week and you have to make them to win big. You will get many small wins and hopefully fewer small losses but it all comes down to the execution of the basics Execute the basics and the rest will follow.
Why stick to basics, because you never know when the big trade is about to happen and because when that big trade does happen you need to be trading at the top of your game. Only a consistent standard of excellence will allow you to survive and prosper or when you face a little fear, greed, and frustration in your trading you have to be at the top of your trading game. You have to think clearly move quickly and effectively overcome your weakness, fears and stay in the game. The trader that controls his emotions and fears controls his destiny.
Staying On the Fresh Trail
I heard a very interesting story this weekend from a very good friend of mine while sitting around a late autumn campfire. He told of a time when he was younger and was on a mountain lion hunt in southern Utah. The group had chased two large cats down into a canyon. From his vantage point he watched the hound dogs try and pick up the scent of one of the cats. After approximately thirty minutes of watching the hounds search in a nearly single file line and in the shape of a figure eight. He came to the conclusion that the lion was not there.
Well five more minutes went by and he observed that one of the dogs the leader of the pack broke rank and started searching outside the path they had been on. And within moments he singled with a howl that he was on the scent trail again and sped off away from the rest of the pack. It wasn’t for quite some time later that the other dogs one by one brake the figure eight and headed off in the direction of the leader.
Trading With or Without Indicators
Everyone has a preference of how to trade and what works for them. I find it interesting when others say this is the best way or that is by far the only way to trade. I know traders that use only price action to trade with. We all know traders that only use indicators. My opinion is that each method has its merits and strengths. Each method has it weaknesses and faults.
The weakness of each method is mostly from the person that is trying to use it. They do not have the skills and experience to use it well so they think it is faulty. Both methods are valuable when you learn and know what to look for in the signals. Some of the strengths of both are that traders can make money with each of them once they learn how to use them.
With indicators you should only take signals in the direction of the trend. This is the fault of most new traders they attempt to “capitalize” on every swing of the price. This same advice holds true with the use of price movement.
Divergences provide a good indication for potential market direction changes. Price action gives signals of market direction change as well. They are both used and can help with the indication of the strength of a movement. Divergences and price action both are useful for filtering out what would be a knee jerk type of price action. Use them together and you really have an advantage.
BUSINESS INSURANCE… When Trading?
When you have a typical business you buy all kinds of insurance. Examples might be:
1. Workers compensation
2. Property Insurance
3. General Liability Coverage
4. Business owners policies
5. Vehicle insurance
6. Employment Practice Liability Insurance
7. Business Interruption Insurance
8. Key man Insurance
9. Errors and Omissions Insurance
10. Directors and Officers Liability
Making a claim:
Here are some tips for making sure you come out ahead in any squabbles over how much your insurer will cover.
1. Keep Detailed Records
2. Be Prompt
3. Follow Up
4. Know Your rights
5. Hire a Lawyer
Here are some examples of Currency Trading Insurances:
1. Stop Loss
2. Only trading a small set % or your account 1%, 2%, 3%, 5% on any one trade
3. Only trading a total amount of your account at any one time. 5%, 10% … your choice
4. Keeping the Margin level % above 1000% ( you chose the level of coverage you want)
5. If your Margin Level % drops down to 500% close all of your open trades.
6. Take the total amount you have for trading and put ½ in a savings account then put the other ½ in you trading account. This way you will have some money to trade with if you lose you trading account.
7. Never add money to your account to cover a margin call.
8. If your account has a drawdown of 10% you stop trading until you figure out what you are doing wrong, or what you have changed from when you were making money.
Another Way To Stay In Control
I once heard a trader say that after he made some money in his account he would take out the original investment. Then he was only playing with money he didn’t originally have making the losses not hurt as much. It became easier to make money because he had taken the pressure off himself.
By doing this he was better able to stay in control of his emotions and not get caught up in trading the money. He was just trading period. He was better able to follow the rules and not get caught up with the placing of the stop loss, getting out early, letting the news bother him and listening to others. He could just concentrate on trading.
Find a way to forget the money and just think about the mechanics of trading and see what a difference it makes. When you are trading your demo account you don’t get as involved with the money, you can concentrate on following the rules and you make money and wonder why you cannot make money when trading your live account.
Just relax and read the market. Trading will become fun again.
Best or Worst trader Or Be The Best You Can Be
When studying traders that seem to have it all together learn concepts do not try to copy exact. We want to know what they did and exactly what happened. That is good in trying to learn but do not compare yourself to other people; Just compare yourself to your own efforts.
Yoga students do not compare them selves to the other yoga students that is detrimental. The same goes for trading. If we compare ourselves to other traders we may not know the real story. They may only be trading demo accounts. We hear people talk about how they made all these pips and it starts to make us feel like we do not know anything. But we do not know anything about the truth of that trader.
We ask how someone trades and no matter how much I am told about it I will not be able to do exactly what that trader did or does. The market moves and may not do what it did the last time. So I will not be able to create the same results. We need to learn concepts and read them for ourselves to be the best trader we can be.
The Importance of Losing when Trading
In real estate the three most important things to an investor are location, location, location. In trading the three most important things are: money management, timing your exits and timing your entries; in that order. More important than how much you make on a trade is how little you lose on the losses. When you are looking for a place to exit a trade you want to consider a location that will not cost too much. Think of how much you will lose before you think of how much you will make. A losing position should be exited as soon as they have reached your worst-case scenario. By staying in a trade so you don’t lose money is not the way to make money. For a pip saved is a pip earned. Learning how to lose correctly is one of the most important things a trader can do. It is important to know how to hold on to a good trade. But if you do not know how to get out of a bad trade you will not go very far as a trader. If you are properly capitalized no one trade will take out your account. Sticking to trading with a stop loss is critical because a small loss does not mean very much but a large loss can end your trading career both financially and emotionally.