Reblog: How to Develop a Consistently Profitable Trading Strategy
During My Training session Many of the traders face the problem their current trading strategy blows; it’s time to search for a new one. That’s what a lot of traders think when they are not seeing consistently profitable results. What you probably don’t realise is that you have all the tools; it’s just a matter of fine tuning.
In this article I will share with you a step by step approach for creating and fine tuning a custom trading strategy fit to your personality.
1: Trading Quotes to Keep Motivated
Included in this plan should be your specific monetary goals, perhaps a motivating quote which acts as your inspiration, and your ideology towards the markets. During the bad phase of trading where you get stop out quiet often, when market are choppy, These quotes will help you to have relax mind and take market head on with out getting frustrated.
Section 2: Trading Strategy
A winning trading strategy should be incredibly detailed. Every possible outcome must be thought out and accounted for in order to succeed. I would suggest to back test strategy for 1-2 years to understand the outcome and try to avoid leverage. Often times, once a trader places a trade their plan and objectivity go out the window. As the saying goes, luck favours the prepared. So take the time to develop your strategy before making that first live trade.Most of traders bust their trading account not because of strategy but the fact most of them are under capitalised.
Outline of a Winning Trading Strategy
A trading plan may contain multiple strategies, but I recommend first going through the process of fully developing and fine tuning one strategy before moving on to a second. Once you have your first strategy to the point where you can visualise the setups in your sleep and enter your trades without hesitation you are ready to build additional strategies.
Set your risk limits at the time you open your trading account:
- Max Daily/Weekly/Monthly Loss: How much are you willing to lose in a day before you stop trading?
No more than 2%/8%/12% of your trading capital on Daily/Weekly/Monthly time frame
Specify the market/Instruments you will trade:
- Pick a market/Instruments: What market and trading vehicle fits your goals and personality? Some traders like High beta stocks like ADAG
Choose a Methodology
Your methodology is only a small piece of a winning trading system. Success results from perfect execution. When searching through various indicators, technical analysis studies and fundamental analysis criteria remember to K.I.S.S – keep it simple stupid. Try to focus on price action based strategy and do not fall in trap in following lot of indicators. Any Strategy you follow have the 3 things ready before you place EVERY trade:
- Defined Entry
- Defined Stop
- Defined Profit Target(s)
Have a Set of Trading Rules
- Trading is simple, but it is not easy.
- When you get into a trade watch for the signs that you might be wrong.
- Trading should be boring.
- Amateur traders turn into professional traders once they stop looking for the “next great indicator.”
- You are trading other traders, not stocks or futures contracts.
- Be very aware of your own emotions.
- Watch yourself for too much excitement.
- Don’t overtrade.
- If you come into trading with the idea of making big money you are doomed.
- Don’t focus on the money.
- Do not impose your will on the market.
- The best way to minimise risk is to not trade when it is not time to trade.
- There is no need to trade five days a week.
- Refuse to damage your capital.