Find a strategy that works for you.
Most strategies work but they do not work in all market conditions.
That is because by the very nature of markets they trend and then consolidate or retrace and then trend again.
As traders we often find ourselves on this eternal search for the perfect strategy and expect the same result in all market conditions. This is simply not possible, a trend-based strategy will not produce the same results when the market is in consolidation.
So how do we solve this problem?
Having the discipline to stick to a strategy and take every trade is one of the keys to achieving success in trading. One idea is to constantly adjust the position size – when the strategy starts failing, reduce the position size and as soon as you see the performance improving, increase the position size accordingly.
It is also vital to get to know the markets you trade. A five-minute strategy applied to the SA40 (ALSI) will give a different result to the same strategy applied to the US30 (DOW). The SA40 (ALSI) trades at around the 53000 level while the US30(DOW) trades around the 29000 level.
It therefore makes sense that the SA40(ALSI) may have a target of 100 points per trade while the US30(DOW) may only have a target of 30 points per trade. Do the homework for each market you are interested in trading by testing the expectancy for each trade.
You will probably find that you should be trading fewer markets. Become an expert in one or two markets, get to know them well and wait patiently for the correct setups and triggers. One of the fears that all traders face is the fear of missing out, so we tend to watch to many markets and have
to many open positions at any given time. Sustainable profit is about trading well – not often.
Now you have probably heard this time and time again but, take the stop losses! The fear of losing capital is real. Everyone would agree that a strategy with, for example, a 70% hit rate is good.
A 70% hit rate implies that for every ten trades taken, three must be losses. So long as you have calculated your risk properly, that hit rate will grow your capital. Let us learn to take the losses and let the profits run!