There are so many learning materials available on the internet and every trader recommends a different way of trading from their experience.You might stick with some impressive way of someone and try to apply them in your trading session and you fail every next time you try and you think the strategy gets a flop.Does really the strategy they(who shared strategy) were shown is not working? Or Is that a problem with your approach? Is that a problem with your timing? Are you in hurry to apply it in real account? Or Are you expecting the same reflection in your account like them who is already making money with the same strategy? I am going to explain you the right way to pick a strategy that will work with you and about trading risk management…
Before explaining you the right way I want you to unveil the cause of your failure.
1.You are not having any plan.
2.You are facing an emotional drive.
3.you are addicted to short market direction.
4.You are not working on your mistakes.
5.You might be following other’s advice on a trade.
6.you are always searching a new course or new strategy.
7.You have a lack of confidence.
8.You do not master a working way besides you are being stubborn with the market to earn 100% with the move.
9.You might be chasing the market.
10.You are expecting more returns in a day.
11.You are taking a lot of trades rather than taking some best trade.
12.You may not be considering the news or fundamentals in your trading session.
There can be a lot of causes but these are major which influence your profit/loss directly to your account.
The very opposite of above-discussed points will get you to the profitable trader list.But where and How to start the journey? Let’s focus on these points.
- Start considering the trading your business and always mind your business.
What do I mean with business here?It is very analogous to the other type of business.
A business focuses on profit and set the loss acceptable.It’s very simple if you took the risk you have an equal chance of getting the loss and profit.So, make your loss also a part of it but do not make it a habit.Try to enhance your winning(profit) more than a loss.
- Risk Reward ratio plays a crucial role in trading business but many of us take it easy.What is this Risk-Reward ratio?
Simply what you get or want to get is a reward and what you loss or how much you should loss in a single trade is a risk.In another way, your target is your reward and your stop loss is your risk.
How do I apply it and how to calculate it?
Let’s take an example you want to buy any stock at a market price of 100 and your target is 110 and your stop loss is 98.It means you target is 10 Points(Dollar or any price depending on market) and your stop loss is 2 points.so, you risk reward ratio is 2/10=1/5=1:5
How will you apply it in your trading business?
You always have to start with at least 1:3 risk reward ratio in your every trade if you are a beginner.What I meant is always trade the pattern which is the late ending or the pattern or strategy which has more probability to drive in the same direction for a long time.When you become perfect in maintaining your accuracy then you can consider 1:2 as well as 1:1 risk reward ratio.
- Maintain you profit/loss in your spreadsheet and look around it to the end of every session/day.
- Make a note of your mistake in the remark of your spreadsheet and recall it in every session before taking any trades and make it a habit so that you do not make the same mistake again.
Note: -Sometimes a working pattern won’t work or sometimes it does not go in your direction( In past you may have a good catch on the same).You have to accept it.
- Always focus on fundamentals first and give it a priority and do not work against news or fundamentals.
- Analyse the chart with your prominent way and mix/confirm it with fundamentals.
- Always try to see the bigger picture of the market.What is bigger picture??
It means if you are taking a trade based on smaller time frame chart then do not forget to see the higher time frame.It is also called Multi-time frame trading.I will explain it with the chart.
Let’s take an exam of the chart.
This is 4-hour chart of USD/CHF and we can see that this is ranging after an up direction, and you want to take the breakout of this range but you do not know in which direction the breakout will be valid,If it breaks down you might take a sell order and if it goes up you might take a buy order.Breakout to any direction may be fake also, so you can cut the chance of getting a fake trade by looking at the bigger picture(Higher time frame).Let’s look at the 1-day chart.
What do you see here?In one day chart also it is in up direction, so now you are confirmed to trade the breakout if in the up direction in 4-hour chart and your result will be accurate most of the time(Not always)
This is the result, which breaks in the trend.
There can be a lot of examples, It is on of them.You practice it better and your result to profit will be enhancing.
Few more points:-
- Trading risk management is the key focus to reduce loss
- Just exercise your way if it’s a simple way its ok, don’t think trading with a lot of knowledge will get you a lot of profit, just stop finding a new way daily just try to practice your simple way that you understand the
- If you like trading with indicators like MACD or any leading indicator and you are suitable doing that, do that and don’t relate to something new.
- Don’t trade in news hour as simple as sitting without trading unless you are expert in taking a trade with the news.
- Focus on math, always put a stop loss of 1 to 2 percent and do not regret if after hitting your stop loss it goes in your prediction, just think the way like if it has been reversed then I would have been in a loss.
- Trading has already 50:50 chances to go up or down so try to increase the accuracy of your prediction.
- If you don’t know the math of risk reward ratio, read it today and try to understand the math behind this.
- You know the quote of trading “keep patience, be disciplined” and this is the only way to be successful.
- Have you tried to know why 95% are losing and only 5% are winning? this is because of not managing
- Learning technical chart is easy but managing risk is not easy because it needs a lot of control which can be reduced by doing practice day by day.
- A lot of traders are making money more than you and not losing money, may be in your friend’s zone they are who started late but are doing better than you even they do not know a lot of strategies but knowing more than them you are losing.
- This is a simple as saying, stop finding a new strategy and new way just try to master in what you know (Even you know the strategy and you know it is working properly because someone is making money with the same you know).
- Mastering one after one is an easy work but making complication with a lot at a time is not easy.
- To increase the focus in the market do meditation, it’s the best way to cope with stress and fear in daily life which will make you free from every external unexpected influence.
- It is must to aware with every news and update at least about the script you are planning to trade on.
- Don’t take others advise otherwise you won’t be able to take trades on your own.
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