Successful Trading = Not Losing
The road to successful trading is definitely a journey that must pass through the valley of losing onto the plateau of not losing. Once you’ve made it that far you are in the company of 10%ers. I know you want to hear about the 5%ers, but if you’ve made it as far as not losing money, it is best to be patient and rest up, and understand there are no short cuts in this game, unless you are willing to increase your losing percentage in exchange for knowledge. I’ve seen that done before, but it leaves you with knowledge but no money, which is like a bicycle with no air in the tires.
I prefer trend trading, which is why I’ve devised the table below. It’s very simple really and you could easily create your own table by hand with paper and a pencil, which is what I did for years. The table gives me the current trend on each time frame. I would prefer not to have the 15 minute on there, but it was my mentors wish to include it as he has an endless curiosity with anything related to trading. In fact it was seeing how he prepared for his trading days that inspired me to create this table which we can call a Directional Ratio, or a Trend Map. �
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I like the Trend Map because it shows me at a glance which markets are displaying coordination betweent he trends. I prefer to see coordination between the Daily and the trends either side of that. If I have conflict, or divergence between the daily and the 240 or the Daily and the Weekly, I’m much more cautious in my trading and I adjust by using counter-trend tactics. My best defense as a trend trader is knowing how to counter-trend trade. A great example of this came last night. I had taken a swing trade long in GBPUSD on the 60 minute chart because I had coordination on the higher time frames. Because I had a possible breakout on the Weekly chart I was looking for a BIG trade and was bumping up against my maximum risk per my trading plan. I had a 50-pip per lead on the trade, with stops placed and I was preparing to leave the desk for the night. As I glanced at the Trend Map one last time I could see that while I had coordination on the GBPUSD at the time, that most of the other pairs had conflicing trends. Seeing this conflicting price action aka counter-trending markets, particularly in the carry pairs, set off an alert in my head that reminded me that trading is very much about ‘NOT LOSING”. I took half the position off, and moved the stop on the remainder to break-even.
This AM I was dissapponted that price had actually slumped lower by 200 pips from where I exited half, and taken my profit away on the other half, but the bottom line was I had a break-even stop in-place and had avoided a losing trade. And that is what trading is all about. �
Jay Norris
www.trading-u.com
The Trend Map is a prototype indicator and one we will be developing further so that it is available for us and our clients.