In trading, like any other endeavor, it is easy to become mired down with the mindset that we need something we don’t have to accomplish our goals. When this happens, we tend to ignore the tools we already possess, and fail to recognize how they can be utilized to achieve those goals.
Spinning your wheels is never good. Constant forward motion is of much greater importance than the speed at which you are travelling. The goal is to monetize the ability and knowledge you possess now, without having to acquire more of either in order to start moving your account balance in the right direction consistently. To do this requires some self analysis to pinpoint what we are actually doing well without realizing it. Once we define it, we focus on it and fine-tune it’s efficiency.
For example: Most, if not all of the trades that drive you crazy while you’re waiting on the target, spend a lot of that time in profit. Think about the point in time when you started wishing the trade would just hurry up and get to that target. What if you just closed it at this point? Where would it be? This will give you an idea of what it is about the trade that makes you feel uncomfortable. It could be the amount of time the trade has been open, it could be the fact that it’s only gone a small amount towards the target, or maybe what appears on the chart evokes some second-guessing. Whatever it is, now it’s known and acknowledged that it is an obstacle. Don’t bother trying to overcome the obstacle though, this wastes time and energy that can instead be focused on fine-tuning what the trade did before it started to drive you crazy. Focus on that part of the trade, leverage the part that was enjoyable and “easy”, and make it pay. Think of ways that you can maximize this part of the trade. Would a different pair pay a little more money, or require less margin for the same result? Have a tighter spread?
Now look inside this little part of a big trade, on smaller time-frames. The entry for a trade on H1 can be executed with much greater precision on a 5 minute chart. Allowing us to further limit entry risk. We can tighten stops, decide we’re wrong earlier. The same patterns and behavior that appear on the longer term charts also occur on the shorter time-frames.
I begin my trading week by considering these things. How can I maximize the productivity of each dollar in my account? I consider them my employees. I don’t want any of them sitting around doing nothing, and I don’t want 10 of them working on a task that 8 can do. Smaller accounts must focus on pairs that pay the most per pip, and require the least margin.
I start with the monthly and weekly charts. It’s important to know where the long-term support and resistance levels are. Then I move down to the daily chart. This shows me where I’ll be working for the week, and what type of entries I will be looking for. Breakouts, range-reversals, trend-following, etc. I know whether intraday support or resistance is more likely to hold or fail.
Now, when it’s time to sit down and trade, I watch daily, 4H, 1H, 15, 5 and 1min – all at the same time. When trade setups that I recognize form on the 4H and 1H charts, I look down to the minute charts to get into the trade. I am looking for that move on H1 to be in-progress, so that the trade is going in the right direction as I enter. I am looking for my trade to go into profit immediately. Once it does, it’s not allowed to go negative, at all. I’ll shut it off with just 1 or 2 pips if I must, just enough to cover transaction costs. Every trade that I take that doesn’t cost me anything, is one trade closer to the one that just runs away and pays out big-time. Since I’m not going to let it draw down at all, I can put some size on it. With more size, the trade doesn’t have to do as much before getting to the point at which I’d be happy if the day ended here. If I’ve got a $5k account, and I’ve got 2 lots on a trade that’s gone 10 pips in a couple of minutes, but now looks like it’s stalling, well that’s somewhere around $200 in profit, I’ll close it immediately. That’s a 4% gain in the account, which is an awesome day, and I’m done. No sweat, no stress, no fighting for it, and I couldn’t care less if it goes 100 more pips after I get out. I’m not going to give any of that 4% back. Time for Netflix.
I do the above each day. Sometimes I end the day with 3 or 4 failed entries that did nothing but break even. I don’t care, because I ether lost nothing, or a very small amount. I know there’s more trades tomorrow. Sometimes though, because the trades are planned on longer-term charts, they will start to run away. In-the-money stops are awesome, period. I love being able to walk away, knowing I’ve got profit locked in, because every now and then, that in-the-money stop does not get hit, and it’s possible come back to find yourself 80-100 pips in profit. A 4% day is awesome, but now we’re looking at a single trade that is dishing out 10 times that. What does the year end up looking like, even if something like this happened only a few times? I call this Luck Management. I’d rather be lucky than good, any day.
The hard part about trading, is not giving it back. To trade this way, you MUST embrace break even as a sort of “win”, and accept multitudes of go-nowhere trades. If you go looking for huge profits, if you’re searching for 40% trades, you end up taking huge risks to find them. These risks start the count-down to account-obliteration. But they can appear out of nowhere when you’re not looking for them. This is why the long term charts are so important to me, even though I’m actively trading on the 5 or 1 minute charts. I stack the odds of getting lucky in my favor, then I get out of my own way and allow it to happen. That one big lucky trade gives me considerably more power tomorrow, because I’m still not going to let anything go negative at all, but can put even more capital to work.
Small accounts NEED these massive infusions of profit to really grow into accounts that can produce measurable income without getting “lucky”. The equity curve should be smooth and rise slowly with huge leaps here and there.
For now, do what’s comfortable. Make THAT pay you, and ignore everything that makes you crazy. Avoid altogether the conditions that negatively impact how you feel. The better you feel, the better you perform, which makes you feel even better… a positive feedback loop that leads to easily accomplishing things that once felt impossible. As the account grows, so will your ability to step out of the comfort zone and take a little more risk – leading to even greater rewards.