If you are having difficulty in this market, it’s VERY IMPORTANT to not only follow your plan, but also to “Return to Basics”, which is a subject I want to cover today.
After a frustrating string of losses, many developing traders begin to search for the Holy Grail or magical solution that will turn around their trading. Anything from a foolproof pattern, the newest indicator or the most advanced trading platform can appear to be the “missing link” that will turn around these traders performance. But the truth of the matter is that such a string of losses is more likely the product of a more basic reason, one that can be cured by stressing the importance of some fundamental pillars of trading. Even though enumerating and explaining all these principles would require a whole seminar (have you considered attending Professional Trading Strategies; PTS) here I will mention some of the more important:
1- Having a Trading Plan. I know this has been repeated many times in countless commentaries. But seriously, how many traders have a sound trading plan? Most reasons for the lack of consistency of a trader can be traced back to the lack of a sound plan, or the unwillingness to stick to it. Make sure that you produce a sound plan which contains chapters dedicated to Goals, Money management and Tactics.
2- Trading only quality setups. There are setups and then there are setups. Not all Pristine Buy Setups are created equal. Minor details in the price pattern can dictate its odds. Define the picture or pattern you want to trade, and then stick to only trading quality set-ups.
3- Trading With The Trend. Most chart patterns have a much better performance when they occur in the context of a favorable trend. Most setups taught in our courses work better in the context of a favorable trend (Climactic setups being the exception, and they’re only used in a small percentage of the time) This is such a basic idea that there’s even a popular phrase which states that “the trend is your friend”. But many traders, consciously or unconsciously trade against the prevailing trend. This is in many cases due to certain beliefs or pre-conceptions brought to the market. Trade with the trend and you’ll see the results.
4- Time your entries with the major averages and internals. A setup suggests a given direction in the price of a security. But the odds of such a move increase or diminish based on the direction of the major averages (SPY, IWM or QQQ) This is not always the case, but it is in the majority of events. So, timing your entries with the general direction of these indexes helps to increase the odds. The use of these internals is taught and analyzed in our Professional Trading Strategies Course (PTS).
The basic or fundamental skills of a trader are the ones that will shape his performance and results. Make sure your basic trading skills are honed to a high degree of perfection. These will determine your consistency. Then you can worry about the more sophisticated issues.
Anything can change by morning, but always be cautious and make sure you ONLY take those trades that have very high probabilities of success. Remember, you have a lifetime of trading
and investing ahead of you, if you make sure to preserve your capital. Do this with proper money management and getting back to the basics! Trading is challenging enough, so don’t overcomplicate it…stick to the basic!
