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Forex Trading Tips:3 Simple Questions For Your Nexxt Trade
3 Simple Questions For Your Nexxt Trade
One of my favorite restaurants in South Beach is a place on Lincoln Road called Nexxt. There is nothing special about this restaurant. It is just another meeting place for the Miami glitterati where the well tanned and the well toned boys and girls come to see and be seen. Its menu is composed of utterly conventional American bistro food. It does however, do one thing well. Every dish on its menu is perfectly made.
The salads are created with only with the freshest, crispiest ripe vegetables. The steak is perfectly charred and moist and tender. The rice is fluffy but not sticky and the sauces are neither too sweet nor too salty. Nexxt knows exactly what it is – a simple American café with every dish executed to perfection.
I often think about Nexxt when I am trading because that’s the standard I want to emulate. If you are anything like me very few of your trades are executed perfectly. A perfect t trade is not one that is a winner. Losing trades can be perfect and winning trades can be an awful mess of conjecture and sheer dumb luck. A perfect trade is one that can answer three simple questions.
1. Does this trade comply with my strategy?
2. Am I in this trade at my proper entry point?
3. Will I hold this trade to the end of my plan?
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Let’s use my 00 setup as test of these questions. My setup is based on the idea of momentum. I define momentum as uninterrupted move of more than 50 points in one direction. The premise is that flow is a more dominant than fade and over many sample periods continuation will triumph over retrace.
The next trigger came from a EUR/USD short which again I took. This time however I was a lot more wary. We were very bullish German unemployment data which was going to be released in half an hour time. Why do I want to be short euros into this data point? I asked myself. I didn’t. So I decided that I would cover the trade if it retraced back to my entry. That was a smart move, because after the unemployment report, the euro traded in a straight line to the upside and would have forced me to take another stop out.
Do I always follow my rules? No. Like everyone else I try to buy bottoms and sell tops. Answer to question number one – not always.
My set up also has very rigorous entry points. I enter on a limit order of a break of the 00 or 50 level. Do I always do that? Again no. sometimes I chase price especially when I am not paying attention and the trade has already moved past my entry criteria.
Answer to question number two – not by a long shot.
My trade plan calls for very specific stop and limit exits. Do I generally honor my stops? Yes. Years of ignoring that rule has taught me to never pull the stop no matter how painful it is to take two, three or four losses in a row. But do I exit early? You bet. The fear of losing my profits will often push me out before my limit gets hit cutting my profits and skewing my risk/ reward edge.
Answer to number three – not even close..
So, when you review you account this weekend ask yourself with all honesty how many perfect trades have you made? If the answer is not many than make a vow to make your next trade as good as the meal at Nexxt.