The following is Part 2 of my Common Sense Trading Tips. While my hope is these tips will resonate, you would be surprised how many traders lose sight of a common sense approach when trading in real-time.
Feel free to comment or contact me directly at [email protected] with any questions or comments.
6. Why I Love Repeat Trades
Why do I love repeat trades?
Some of my best winning streaks have come through repeat trades. By repeat trades I mean repeating the same strategy day after day or intra-day, sometimes at the same level or on the same side of the market (e.g. sell rallies or buy dips).
In other words, there is no reason to reinvent the wheel each time you trade. This does not mean to trade one side blindly but be patient looking for /repeat trade opportunities. When they arise, this strategy can be very profitable.
I find this works best when trading with the trend although if you find a pattern that is working (e.g. name market), milk it until it stops working.
Tip: Keep repeating until it stops working. At that time reassess and look for a new repeat pattern to trade.
7. Use Stops: Live to Trade Another Day
One of the major flaws that retail forex traders make is a reluctance to take a loss. Losing is part of the trading business and many traders, especially new ones, do not like to admit they are wrong. This may sound obvious but I have also seen experienced traders get stubborn, lose discipline, and override their stops.
This either leads to outsized losses or hedging losers in the hope of recouping the loss by trading out of the hedged position. Either way, it is a road to the poor house, and why we always use stops in our trading.
Tip: So traders beware. Don’t think you can outlast the market, especially when in a leveraged trade, as your pockets are not deep enough. Accept losses as a cost of doing business and hopefully your gains will exceed your losses. In any case, using stops to protect your capital means you can live to trade another day.
8. Watch Out for Stops and Use Them to Your Advantage!
I cannot emphasize enough how important this is to understanding how the forex market works.
The forex market is driven by a constant search for stops. This is true across all time frames but especially true for intra-day trading. You do not need an order book to get a sense of where stops may be resting. It is a skill you can develop over time.
This is not to suggest basing your trading on guessing where stops are lying and hoping that they get run. However, adding this to your trading mix should help you assess the risk and the strong side of the market at any point in time.
Tip: Beware of getting caught on the wrong side where stops are at risk of being run. However, when there are no stops left to run, a currency usually trades sideways as the market often loses interest on that side. The result is then in a narrowing range or a probe on the other side looking for stops. .This may explain why the market tends to die off during the US afternoon when there are no stops left nearby to go after
9. When trading against a trend don’t overstay your welcome
Many traders like to fade moves and trade against a trend. This is often referred to as contra-trading.
When trading contra, you need to be faster to take profits than when trading with a trend. While there is no rule set in stone, more times than not a contra move does not reach a target level for the trade and is quicker to reverse once the buying (or selling) runs out of steam than a move with the prevailing trend.
Tip: Don’t hold out for the last pip when contra trading and why I say don’t overstay your welcome when trading that side of the market.
10. The Hard Trade is Often the Right Trade.
Markets rarely give you an ideal entry level and when in a trend, finding a good one may be hard to find. This lures many into buying or selling at what looks like a bargain price only to see it be a sucker bet. Of course, there are exceptions but as a rule, the hard (to find) entry is more often than not the right trade.
This may sound simple but I believe it is one of the keys to trading. Get on what I call the strong side of the market (i.e. the side less likely to see stops run against you) and the odds can tilt in your favor.
Tip: The hard (to find a good entry) trade is often the right trade as it puts you on the side of the market where you are less likely to get stopped out on the next price move..
Related articles:
Jay Meisler’s Common Sense Trading Tips – Part 1
Jay Meisler’s Common Sense Trading Tips – Part 3
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