Monday, October 30, 2017

How to Break a Trading Plateau | Trading Psychology



Today’s Trading Psychology Question is…


“What’s the most effective way to break a trading plateau?  I’ve been consistently profitable for a few months now, but I stopped seeing improvement in my trading, and I’m worried if I don’t keep improving because I know I’m stilling missing a lot of moves each day.”

This is a great question, and one with a few layers of answers, so let’s dig in...

First of all, the fact that you’re consistently profitable is a big deal, and you should be proud of yourself.  Most traders struggle to find consistency, so you’re clearly doing something correctly or you wouldn’t be able to say this… so keep doing whatever you’re doing.

Second thing is… have you considered just increasing your position size to earn more money?  If you’re trading a liquid market you should be able to keep trading the same way, but you can earn more money by adding another contract as your account grows.

I always say… the easiest way to earn more money is not to trade more often, but to trade a bigger position size. 

Don’t add more markets, don’t add more indicators, don’t take more trades, just do more with the trades you’re already taking.

That brings me to my next suggestion… your trade-management… specifically your stop-loss and your targets.


I’ve worked with a lot of traders over the years, and most people use a stop-loss that is about 25% too large.

For example, I know a lot of people who use a 20-tick stop-loss on Crude Oil, but I teach my clients to use “limit orders” to enter trades on a pullback so they can use a 10-tick stop.

If you’re making profit with a 20-tick stop, and you can cut that in half to a 10-tick stop, now you can keep 50% more of your capital in the event of a stop-run.

Bottom line, if you want to make more money, cut your losses faster so you can keep more of the money you’re already made.

The next aspect of trade-management would be your targets. 

Your targets should always be placed using two basic principles:

1.     What is customary for the market you’re trading
2.     What is the “objective” at that moment in time

For example, the customary target for day trading Crude Oil is 10 & 30-ticks.  I don’t know why, but that market loves to make a quick 10-tick move, followed by a 30-tick move and then pullback. 

This takes a little experience, but if you’re looking for a way to make more money each day, I would study the market you’re trading, and find those targets that almost-always seem to get hit, such as 30-ticks on Crude Oil.

The next aspect of your targets would be knowing where the market’s objective is, and leaving a portion of the trade open as a runner.

I use the term “objective”, but what I really mean is… if the bulls have control… where are they really trying to go? 

Are the bulls trying to re-test the high?  Channel Rotation?  Double-Test a measured-move?  Where is their ‘objective’?

This (again) takes a little experience, but one of the easiest ways to earn more money would be to master the skill of understanding what I call the ‘'Price-Action Cycle' (which you can learn in the intermediate course) which basically tells you where the markets WANTS to go, and you can use that for a runner target.

Ok….We’ve covered a lot so far… let’s recap.

If you want to make more money, I don’t recommend trading more often. 

It’s easier to make more money with a smaller stop-loss.  Look for ways to use more advanced entry techniques (such as a limit-order) to cut your risk in half, so you keep more after a loss.

Then start thinking about your targets.  Every market has its own personality, so invest the time and learn the most common targets (like the 30-tick target on Crude Oil)…

…and make sure you truly understand, based on the current situation at that moment in time, where the market’s objective is, where the buyers or sellers want to go in the end, and use that as a runner target.

It’s tempting to want to trade more often to make more money, but one lesson I’ve learned the hard way over the years is that less is almost always more, and the easiest way to increase profits has to do with…

·       Having an intimate relationship with the market you’re trading
·       Being aggressive with risking less on each trade
·       Using what the market is already telling you to take the most effective targets.


What do you think? 

Did that give you a good strategy to break through that plateau?

Do you have any additional questions? 

Any new topics you want to see me cover in my next trading psychology video?

Drop me a comment below the Video, and make sure you share this video with a friend because it doesn’t matter which market, or which strategy you’re trading, we all battle with what’s between our ears, and I would love the opportunity to help as much as possible.


And don’t forget… we’re only getting started today, stick around later this afternoon for my Nightly Newsletter, and I look forward to seeing you every morning in my trade room @ 8:00am EST.

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