The background to last week’s presentation was basically do not second guess your initial research unless you have a damn good reason.
One week later.... absolutely nothing has really changed for me. I am still on the outside looking in.
I still have my macro thoughts, which have not fundamentally changed from just before the end of last year. All I see is a lot of huff ‘n puff and as a result we are largely range trading.
The issue I have, and I do have one is that market expectations versus Central Bank expectations are still NOT aligned and as a result EQUITIES, BONDS, SOFT LANDING, HARD LANDING, OIL, GOLD pricing is not making sense to me most of the time and the VIX just highlights complacency. I am patiently waiting for confirmation of a move based upon real data and real commentary.
So, I guess for a while longer I will act like a 5 year old with his/her nose pressed up against a retail stores window around Christmas wishing I could have access to all the goodies.
To say IT’S NOT MAKING SENSE would not be the first time in 20 years of trading for me to utter those words but it’s as relevant today as it was on all the previous occasions. They key is not to get drawn into a trade that is not fully researched based upon solid foundations.
There is no WEEKLY FX DRIVE THRU (YouTube) presentation this weekend, rather a written article.
Instead, I want to post something from the supportive documentation contain inside the WEEKLY FX PREMIUM subscriber area, that I believe is as relevant today as it was when originally written in February 2014.
FOLLOWING YOUR TRADING PLAN
Let’s say that you have made a very detailed TRADING PLAN.
- You know the rules that you are going to follow to place a trade.
- You have maybe even drawn up a checklist to be by the side of your computer to make sure that you follow the guidelines.
- You have your money management / risk strategy in position, and you know how much you will risk on each trade placed.
- You may even have noted in your TRADING PLAN that you will only enter a trade with a pre-determined risk / reward ratio.
- You know what times you are going to trade and what currency pairs you will focus on.
- You have your journal / spreadsheet ready to track and provide further trade analysis.
This is the easy part. You can study all you want and can dummy trade “until the cows come home”; the bottom line though is that until real money is on the table it’s all theory, nice as it may be. When your $$$$ are on the line, it is a different ball game.
Having a great detailed TRADING PLAN is fantastic but unless it is executed in line with your parameters, it is pointless, and you have wasted a great deal of your time putting it together.
Regular readers of my blogs over the years will know that I am 100% in agreement with many trading gurus that FEAR and GREED drive the markets. These are basic human traits. In trading, the biggest obstacle that prevents most traders from being successful is NOT following their TRADING PLAN…the factors that prevent them following their own guidelines are most of the time psychological.
Psychological issues can prevent the profitability of a trading performance. If you have been trading for some time, I am certain that you have felt at times that you are not making as much money as you should be based on the TRADING PLAN that is in place. Most of the time when you analyze your results emotion plays a huge part, and at the end of the day we are human, and humans have emotions.
There are probably three mistakes that can ruin even the best TRADING PLAN.
- Taking a trade that is NOT part of you guidelines.
- NOT taking a trade that is within your guidelines.
- Changing the guidelines of your plan based upon an event.
Taking a trade that is not part of you plan is tempting. There are many reasons why you as a trader would do this.
- You have a series of poor trades, and you are in a losing streak desperate for a profitable trade.
- You have so much success recently with your trading you think that you know better than the markets, you think you are invincible.
- You read or heard “a tip” from a bank or large institution to say that it is buying a particular currency. You get suckered into a trade and when in it you recognize that ‘the tip” was a sucker trade.
- You jump into a trade, just to get into the market.
All of the above scenarios are quite dangerous. If you generate a set of loss making trades, you feel depressed. If by a fluke you generate a few profitable trades, you then break the rules, and your plan is worthless. If you make money, it was a pure fluke and just cannot be sustained for anything other than very short-term. Psychologically, this is a bad practice for any trader.
Not taking a trade that is part of your TRADING PLAN, sounds weird put it is quite commonplace. This is where FEAR and GREED comes into play.
- You may have had a series of trades within your trading guidelines that lost money and you decide on the next one to let it go by even though it is within your TRADING PLAN guidelines. You are scared…FEAR of losing.
- You have had 5 or 6 very profitable trades in a row, and you believe that your “luck” cannot last any longer.
Regardless of the cause, this is a dangerous path to be on. You can watch what would have been a great trade go by and then you jump in on the trade that may not meet your guidelines. You change the rules to revenge a trade you missed. This usually means that you never maximize your profit opportunity.
Finally, changing your rules can be the worst thing ever that you can do. As a trader you will have loss making trades as well as profitable ones…. it is a fact. If you had entered say 300 trades and you have had success and your strategy is profitable, you should be happy. Some traders may experience 5 or 6 loss making trades in a row, and then without reason change their strategy on entry / exit / risk. Why change your guidelines on such a small sample of trades. Changing your guidelines is something you can do but a “Knee- jerk” reaction is a poor reason to change. You should make any changes based on analysis.
Some traders are happy with 60% -40% ratio of profitable trades to loss making trades. Others are 80% - 20% profitable to loss making trades. It all depends on the type of trader you are and your exit rules on trades as to what to expect with regards to your success ratio.
Hopefully, this short document will serve as a good reference. If you review your trades after 90- days and look at the reasons why you were not as profitable as you thought you should be, check the points above and see if one or more applied to yourself.
As long as we learn from our errors we can move forward profitably. You have the guidelines and rules in place. You just need discipline. Overall, my point is you must PLAN YOUR TRADE and TRADE YOUR PLAN.
WEEKLY FX PREMIUM PERFORMANCE:
JANUARY 2024 so far....
THE FINAL SHOT:
Finally, always remember longevity in Forex trading can only be achieved through trading with a good MINDSET, RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.
Remember we trade for the following three critical success factors, that are your strategic goals: -
- Conserve Capital
- Generate Income
- Increase the Size of your Trading Account
For more information on me and how I trade via THE WEEKLY FX PREMIUM...
If you visit my website, you will find lots of additional supporting information about the way I trade. The link below should be helpful.
If you want to be notified when these presentations are released, subscribe to my website, and be notified and also receive the appropriate links to the presentations. Please click on the following link: - https://bit.ly/drivethruregister
Finally, be grateful for your wins and count them. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
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BLOG VERSION: #536 FREE NEWSLETTER
DATE: 21st January 2024