What is your strategy for profitable traders
Trading pioneers or why you should stick to your strategy
Before Roger Bannister ran the first mile under four minutes on May 6, 1954, no one thought this was possible. But just two months later, two more athletes did it in less than four minutes. Since then, 1,400 athletes have achieved this feat.
What does this have to do with trading? This answer can be found in psychology, to which much can be traced back. Before Bannister ran a mile in under 4 minutes, very few people thought it was possible, but when he did, people knew it was actually possible. Bannister gave other athletes what psychologists call "social proof". With this, people know that they can copy someone else's actions to achieve a similar result.
Most novice traders hope to find a strategy that suits their lifestyle early on. If you follow a trading strategy, you are more likely to get the results you hope for in the market. Nevertheless, no strategy is perfect and can lead to a paradoxical development, especially at the beginning.
You run the risk that after a few profitable trades you will feel that "this really works". However, it is possible that you will suffer losses afterwards as well. Losses should be taken into account at the start, but increasing losses can cause doubts about a trader's ability and strategy.
This, in turn, can lead to someone trading irregularly, e.g. B. when profits are no longer being taken, just to see if the trade continues to move in the same direction seconds after closing. Or worse, you keep insisting on losing trades because you don't want to go wrong again.
Here is an example of a trading learning curve.
The trading learning curve
Successful traders would likely recommend that you stick to a consistent approach to trading. That means you have to believe in your strategy. When novice traders begin to doubt their strategies, they are disregarding their own rules, which inevitably has a negative impact on the outcome.
As a novice trader, how do you develop a strong belief in your trading strategy?
First, of course, it can be useful to find a trading mentor who can explain trading strategies to you - theory, application and results. In doing so, you should learn the small changes and nuances, tell the difference between two similar setups and why one is more attractive than the other.
Second, and this is crucial for beginners, you should learn how to challenge your strategy. In that case, take the specific criteria that make up your strategy and look for setups that have been done in the past. The following points are crucial:
- How often have these setups occurred?
- What was the result of these setups?
- In which direction was the trade going?
- Where would you have placed your take profit order?
- And where would the stop-loss order have been?
- Would the trade have been profitable or not?
Backtesting should give you more confidence in how your strategy is working. Used correctly, you can steer the probabilities in the right direction in your favor.
Novice traders sometimes tend to change their behavior when the market moves in their favor, believing that they are on a "winning streak". This will likely affect the way they approach their next trade.
The mantra of a successful trader
To solve this problem, you can follow the successful trader's mantra, "Never let the outcome of a past trade affect the way you approach the next trade."
Regardless of whether the last trade was a win or a loss, you must never be more positive or negative on the next trade. It is important to assess each trade independently and to make decisions independently of emotions.
Especially in the early days - you should continuously follow the pre-determined approach and develop a belief in your own abilities.
Consistent trading success doesn't happen overnight, in a week, a month, or a year. It takes many years and has more to do with how you trade as an individual than with the markets themselves. You need to trust your skills, develop your strategy, and follow the rules that you have set for that strategy.
The content of this market commentary is for general information only. They do not constitute an independent financial analysis or financial or investment advice. They should not be relied upon as an authoritative basis for an investment decision. The content is never to be understood in such a way that CMC Markets recommends or considers the purchase or sale of certain financial instruments, a certain point in time for an investment decision or a certain investment strategy for a certain person. In particular, the content does not take into account the individual investment goals or financial circumstances of the individual investor. The evaluations, estimates and prognoses given in the content reflect the subjective opinion of the respective author or the respective cited source, can be subject to changes at any time and are made without guarantee. In any case, CMC Markets is not liable for losses that you suffer directly or indirectly as a result of an investment decision that you have made on the basis of the content.
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