5 Principles That Turbocharged My Trading
Over the last few months of summer I have been daytrading particularly, registering only 2 losing days over the past 40. (This sentence will no doubt now curse me) But at the risk of tempting fate I thought I would put to paper 5 things that I have been doing differently that I believe made all the difference.
- Pare your focus. As I mentioned in my earlier columns I only trade 6 currency pairs -- EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD and USD/CAD. In fact I am so focused on those pairs that if you were to ask me the price of a cross -- say GBP/JPY or EUR/GBP for example I genuinely couldn’t tell you. Now that type of myopia may seem extreme to you, but on other hand I know every tick in those pair for the past 5 days running and that give a much better understanding of the price dynamics at play.
- Trade your setup only. Over the past year we have developed and refined a very good day trading system. It has proven profitable across more than a thousand trades. But like every bad trader I used to like to freestyle. Instead of sticking to the setup I would take a punt on news trade or just put on a position out of boredom. No more. The only creativity I allow myself is within the constraints of the setup. If the trade does not fit into the parameters I don’t take it.
- Chop it up. Trading, and especially day trading is a probabilistic enterprise. There is NO good price -- only a set of reasonable prices for entry and exit. So dividing your entry and exit in at least 3 different orders will increase your chances of success markedly.
- Strategy is good, but context is everything. Never, ever be a slave to your strategy. Strategy is simply a structure through which you trade, but you have to know when to use it and when to stand down. The most obvious example of that is not running your EA in front of news-but there are many more subtle clues that you have to take from the market to truly refine your trading. That’s why no automated system has ever made money over the long term. As one of my traders said, it’s market’s job to get you into bad trades and out of good ones, and it’s your job to avoid the bad trades as much as possible.
Last, but most definitely not least the one rule that has truly made me the most money is -- EYES ON THE SCREEN. If you are day trading and decide to casually leave your positions be you might as well kiss your money goodbye. That’s why now, when I have to leave the office for more than 20 minutes, I close every trade and go flat. I even created a little ditty so I won’t forget -- If your eyes are not on the screen -- you won’t see green.