How to simplify your trading and stay consistent

When I first began trading, I had a really lousy trading strategy that I picked up from somewhere on the Internet. It involved using three indicators – MACD, stochastic oscillator, and simple momentum indicator – to make trades. When all three indicators would match up in the downward direction at the top of the chart, I would take a put option. When all three matched up in the upward direction at the bottom of the chart, I would take a call option. I didn’t even pay attention to the actual price chart because I simply didn’t know how to interpret it. Needless to say, this strategy was not only ineffective but also way off base from gaining predictable insight into how the market works.

To learn how to trade well, it’s absolutely necessary to understand how market dynamics work. I covered this in a pretty good degree of detail in my most recent strategy posts – that is, how buyers and sellers interact to create price movement. And my overall strategy is not at all complex at all. It’s based on support and resistance levels in the market, which are a fantastic aid in helping find potential reversal points (short-term or otherwise) in the market. I also consider trend and market patterns as well to help base my market decisions. I’ve had several people tell me that my general strategy has been working for them, or that they’ve at least been able to win over 50% of their trades consistently. Not every trade strategy will work for everyone, as each brain processes information differently from another, but I would encourage everybody to look more toward price action and support and resistance levels (and sticking with the recent trend whenever possible) as the basis of their trading. It’s simple, clean, and effective when traded properly.

As for other things to help simplify your trading:

1. Stick with the same asset(s) 

Learning your assets well is a very valuable skill in trading effectively. It’s better to become very well versed in one or just a couple/few assets than skipping around. Also, if at all possible stick to the following “major” currency pairs – EUR/USD, GBP/USD, AUD/USD, USD/JPY, GBP/JPY, EUR/JPY, USD/CHF, USD/CAD, NZD/USD, EUR/GBP, and EUR/CHF. Other pairs – termed “exotic” – consisting of lesser well-known currencies, have less liquid markets because they simply aren’t traded as much. This can lead to some very turbulent price action and are therefore much more difficult to trade successfully.

2. Stick with the same timeframe

For 10-15 minute expiries, this usually means looking at a 5-minute chart. The 1-minute can work, but there is so much noise and a limited viewing window that it can be tough to trade well on this timeframe. I only go down to the 1-minute chart when I want to get a very close-up perspective of how price is acting for purposes of getting into a potential trade. But overall, 5-minute is your best bet for 10-15 minute expiries.

3. Keep your money management constant

Always give yourself an absolute upper ceiling on the amount you’re willing to risk on any individual trade. You can figure this out by taking the amount of money you can safely lose to trading and multiply it by a small percentage, preferably 2% or less.

And that doesn’t necessarily mean 1% or 2% of your account balance. In fact, I only like to deposit as much as the amount of my first trade. When betting smaller amount of money (under $25/£25/€25), then simply making a minimum deposit would be fine. There’s never any need to leave a lot of money in a broker. Always deposit only as much as you need. Believe it or not, you will actually psychologically feel better with a smaller amount of money in your account. I’ve always found it to be an easy way to ease the tension that can often accompany trading real money.

4. Stay regimented

Trading at roughly the same time of day every day can help you get to learn the market you’re trading. Trading at 2AM EST can and will be very different from trading at 9:30AM EST. The market will look and act very different. Finding your proper dose of trading volume in the market is important. I myself prefer moderate volume, not too low but not too high, which I can get between the hours of 3AM EST and 8AM EST. After 8:30AM EST, the U.S. market opens and crosses over with the European markets, so volume will be quite high. That doesn’t mean you need to have yourself glued to your chair for a certain number of hours every day five days a week. Doing other activities while you trade is fine if setting trade alerts when price approaches a potential trading area can be set-up on your trading software.

And staying consistent in applying your trading strategy over and over again, and only taking the very best set-ups you have in front of you – and have planned out far ahead of time – is very important with regard to consistency, as well. However, never trade if you’re feeling tired, stressed, ill, mentally down, or just not in the proper mindset overall. I have no reservations about skipping a trading day if I’ll be busy, or if any of the aforementioned factors is affecting me. Even when I have time to trade binaries, I almost never trade them more than three times per week.

5. Keeping a clean trading environment

Always keep a clean desk, workspace, and trading room is very important. I find that when I have a ton of junk on my desk or in my room my mind will often get bogged down as a result of all the clutter. I once heard of a trader who did very well over a long period of time trading from his small apartment in familiar surroundings. But once he began trading in other environments after moving, during his travels, and in spots not well known to him, his trading suffered as a result. There is a lot to be said for the fact that your surroundings and environment affect your general mindset and this can bleed into your trading as a result.

Trading doesn’t need to be overly complex. But getting into a trading routine – trading the same asset at the same times on the same timeframe and using the same trade expiry – and executing a simple trading strategy revolving around price action and support and resistance levels is all that’s been required for me to see my trading results get better over time.

VN:F [1.9.22_1171]
Rating: 5.0/5 (5 votes cast)
How to simplify your trading and stay consistent, 5.0 out of 5 based on 5 ratings