Improve your trading in one Week
How to improve your trading in one week…
First off… Yes. that is a bold statement for sure. I feel very strongly that you can make dramatic improvements in your trading in just one week! How, you may be wondering. Well let's just jump right in.
I will give you three steps to follow over the next week. Read through this and take the simple actions. You won’t be disappointed.
How do you trade Forex right now?
Take a long hard look at your trading performance over the past 6 months, 3 months and 1 month. Is it as good as you hope for, better or worse? Ask yourself How do you trade Forex right now? Regardless of your answer, you will need to look deeper and understand why. As in "Why" did you do better that you expected, was the market behaving in a manor that suits your trading style? Or Why did you not meet your goals? Did you follow your trading plan or did you stray from what you had laid out?
Once you have taken stock of your recent performance you can quickly see where your strengths and weaknesses are. All too often traders get caught up in the “get rich quick” notion of trading. This tends to lead to a gambling mentality. Remember what Warren Buffett says about risk. This leads me to the first of our 3 step one-week challenge.
Keep risk low
Step number one is to keep risk low. Many traders start with a smaller account balance as they don’t want to risk too much capital initially. This is a good idea on the surface. Problems start to show up when you just worked hard on you trading all month and only have enough profit to buy one nice dinner out. After realizing this, most people end up risking way too much per trade in hopes of accelerating their growth.
After a few losses (yes they do happen) the account balance gets reduced dramatically leading to even higher risk in order to “make it back” and the downward cycle continues.
We need to change our mindset and focus on % rather than the dollars. If you make 5-10% in a month on a 200K account, you would be pretty happy. That is 5-10 thousand dollars. And most investments only get that in an entire year. Soooo why do traders get bent out of shape making 5-10% a month on a $1000 account? Because it is only $50-100. See what I mean about looking at the % rather than the dollars?!
Make sure you risk no more than 2% of your account on any trade idea and you will be far more likely to preserve your account through a few unforeseen losses! Check out our free position size calculator here to make sure you are risking the right amount.
Purge your charts
That’s right! Strep two is to get rid of all your indicators and try focusing only on price. It is very easy to get sucked into the next best indicator or some magical arrow, but we need to get back to basics and really SEE what price is telling us.
Go to a higher time frame such as weekly, daily or four hour. Mark out ONLY the major Support and Resistance levels. These are your levels now. Anything in between them are secondary levels. We want to stick with the big turning points.
Make an "if then" plan
What is an if then plan? It is a plan for what actions you will take once price reaches the levels that you have laid out from the higher time frames. For example if this happens, then I will do that: See the image below:
Your plan should include several options that have specifics such as “if price breaks this level, I will wait for a re-test of the level before thinking about an entry.” It should also include parameters like what % risk you will be using and what your projected targets and stop losses will be along with a Risk to Reward profile. I always suggest shooting for 3:1 RR, (This means that a win will be 3 time larger than a loss).
After following these simple steps for a week, I am sure you will have a different feel for how trading can be. In my opinion having a plan for every outcome is always the best way to go. Of course, even these sometimes don’t work out and that is why we only risk a small % of our account. Like Mike Tyson says, “Everyone has a plan until they get punched in the mouth”