Hello and welcome to to another edition of the bulls versus the bears. Today I have another simple message for you. It’s not the quantity of your trades..It’s the quality. There is absolutely no need to enter trades day in day out as if your pants are on fire. If you’re afraid of missing the next big market wave? Don’t bother! If you miss what you believe is a juicy trade pattern, you’re sure to see it the next day. Keep your fears at ease!
Don’t act as if forex trades are “reduced to clear situations”. The forex market is not up for sale that you have to trade as if every trade could be your last. Do you know what this kind of strategy is called? It’s called overtrading. I can hear somebody asking:
What Constitutes Overtrading?
First off, you are always in a trade. You feel you absolutely must be in every trade or else you are going to lose your sanity. You are so obsessed with the forex markets and your trades that you go to sleep with your trades and dreaming about the next trade. Even worse, you are involved in multiple trades which is forex suicide. But you can get away with multiple trades only if you apply solid risk management.
IF you want quality trades just trade at least 6 times a month. Or pick one or two high probability sets that are solid enough to keep you outside of the house for long periods of time. Just set and forget and smell the roses.
Let me show you how overtrading affects your trading process and your trading account
You Trade Too Much You Blunt Your Edge
Yes! When you trade too much your trading edge becomes blunt. Instead of focusing on quality trades which give you an advantage over other trades you settle for bread crumbs. By bread crumbs I mean low quality trades that fall outside the criteria for your trading edge. And when you do that, your chances of prosperity become slim.
If you want your forex trades to be high quality you need to know the difference between market noise and high probability price events(trades). Now market noise is a fancy term for sideway markets while high probability price events are, well. high probability trades. It’s absolutely crucial that you know the difference between these two trade categories or else you may end up taking trades that are nothing but loud speaker thumping noise and not real price signals. Even worse they end up blunting your precious trading edge.
Brokers Get Rich At Your Expense
The more you trade the more forex brokers get rich at your expense. Of course I can hear somebody asking “But how do these brokers get rich at my expense?” They get rich through the spreads and commissions that they charge you. So that every time you trade they make money from your trades. So if you want to gain an edge over your broker, TRADE LESS!
Too Much of A Good Thing Is Bad
I’m sure most of you know the phrase “Too Much Of a Good Thing Is Bad.” You like something so much that it become an addiction to you. The same thing scenario applies when you trade too much. You become fixated with the trading process that you feel like you have to jump into the market at every opportunity. IT’s like gambling. You get this huge adrenaline surge to blow all your money all at once. And when that happens all your money is gone.
So How do you cure your trading addiction? By laying out a trading plan where you identify your trading edge which will guide how you enter your trades on the market. Failure to develop a trading plan could be highly detrimental to your trading health Your trading addiction becomes progressively worse and you will end up blowing up your trading account. Two things could happen in the process. Either you learn your lesson and go back to trading the right way or you become so dehydrated from your addiction that you end up quitting as a trader all together.
I guess the appropriate question is:
How Do I Cure OverTrading?
You need to trade less. In other words you don’t need to trade 70 times a month. The ideal number is 5-7 times a month. Anything beyond that is a crazy addiction. While you are at it, put some strict rules withing your trading plan. At the same time add some flexibility to your trading plan to complement the rigidity. By that I mean where you place your stop loss, How you enter your trade, How much you can afford to risk, e.t.c.
Look For Trade Setups Which Align With Your Trading Plan
You need to look for trade setups that align with your trading plan. You must identify setups that satisfy the criteria in your trading plan, visavis your trading edge. And while you are it, apply what is known as a T.L.S. filter. Basically you create a set of criteria to ascertain whether the trade is worth risking your money on. The filter must satisfy two at least two of these criteria:Trend, Level, and Signal. These criteria are what you call multiple factors of confluence. For more information on multiple factors of influence look up Something Called Influence
You need to adopt the mentality of a hunter waiting patiently for his prey to appear. It doesn’t mean you go after every trade your eagle eye spots on the chart. You only save your cash for trades that you know will take you to the Promised Land. Just like a hunter who only so many bullets to waste, you have only so much cash to risk. So be frugal with your money or your trading account will blow up like dynamite.
Set and Forget
I’m quite sure you have heard this phrase”Set and Forget.” It’s a simple but effective approach. All you have to do is set your trade, forget about it and get on with life while the trade rakes in the moolah for you. Instead of jumping into the next available trade let your original entry play out for as long as possible to allow your your profits to accumulate.
You need to understand that solid trades take a while to play out . And if you want to catch the big waves on the market you need to adopt the hunter mentality that I alluded to earlier. Stay patient with your cash cocked, and when the opportunity presents itself, you pull the trigger. This also means that you stay away from your screen. Take a chill pill while your entry racks in the cash for you. In so doing you improve your chances of making substantial trades. You certainly do not need to trade loads of times to rake in those profits.
Stick To One Market Direction
Please stick to one market direction. If it’s the bullish trend you enjoy trading with do that. If it’s the reverse trend, by all means do that also. But whatever you do, STAY AWAY FROM CHOPPY WATERS. Because you will crash and burn. The market is moving sideways in this scenario. All you have here is a whole lot of noise, and the price signals aren’t that clear either.
And when you do get burned in choppy waters, you are tempted to jump into another trade again(Trade addiction anybody?) That’s highly dangerous and inflammable in that your trading account could end up in flames. So your best option would be to stick to markets that are strongly trending and moving in one clear direction.
That’s a wrap for “It’s not The Quantity of the Trades… It’s The Quality”. Less is more where forex trading is concerned. Unlike what people may thinkt here are not too may trade setups to go around throughout a calendar year. So it does not make sense that you go kamikaze looking for trades like a chicken with his head cut off. So it only make sense to be less conspicuous on the market. The less you trade, the better your health will be.
Take a low frequency approach when trading. But that’s not to say that you don’t turn the other way on the most obvious trade setups. Of course it takes considerable skill and education to identify the most obvious trade setups. I mean you don’t just accomplish these at the snap of your fingers. With the help of price action techniques such as Set and Forget, you should be able to nail down obvious trading setups with ease.
Till next time take care.
Looking To Join The Forex Trade Gravy Train?
If you’ve stumbled in here looking to join the forex trade gravy train, here is what you need to do . First, look up Why Forex Trade Is So Popular. Next, you learn the fundamentals of forex trading by reading Forex Trading Basics – Top To Bottom Part I and Forex Trading Basics – Top to Bottom Part II .
Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis. And you need to know what these patterns are telling you. To be able to do that, read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns . Also You Need To Know Ten Of These Candlestick Patterns .
And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis, instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading?
Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels. And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know How To Read Candlestick Patterns using Support and Resistance Levels.
However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch of several weeks, consult How to Spot High Probability Trades. And if you are still not sure about price action trading, find out Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the suggested posts above are the most important posts to get you started.
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If you want to know everything there is to know about price action trading, Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life. It sure did mine.
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