Are you not getting the results you want from your trading? Perhaps, are you thinking that it might be a good time to start over from scratch? Here’s what I would do if I found myself on a deserted island, and all I had was a computer and a trading account.
(I am not sure how I would connect to the internet on the island, but let’s just run with the idea)
1) First, throw out all your indicators and start fresh.
Nothing on your charts except for price. Some people trade without any indicators. That’s ok. It can work (anything can work if you make it work). But for me, that’s like driving without a map. So I like to have an indicator or two on my charts.
2) Second, master the principles of support and resistance (S/R).
Back to the basics, and that starts with supports and resistances. Next, give yourself one more indicator. Something like a divergence indicator. It shows you when price is about to continue a trend or reverse a trend. And that’s it.
Now, use S/R and the divergence indicator to make trend or counter-trend trades. Pick one or the other. It doesn’t matter. Do not get into arguments about trend trading vs. counter trend trading. Those are dumb arguments made by people with inflated egos who probably collect Corvettes or wear polo shirts with the Ferrari logo even though they ride a bike to the grocery store.
3) Third, pick 5-10 financial instruments.
Use only the 60m or the 240m charts. This will give you swing trades. You will get 1-5 trades per week. Not per day. Your trades will last for about 72 hours, or less.
Some people like to day trade. That’s short-term trading. Lots of trades each day. I think if you want to do that, you are better off just putting your wallet or purse in the middle of the street, then putting a nuclear bomb on top of it, and then blowing yourself and your money to high heaven.
I have met two people in my life who are great short-term traders. Out of five thousand (or more) traders I’ve met. That’s it. I’ll write a separate post about them another time.
4) Fourth, I would obey the ‘Three Trading Rules’. They are:
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i) Rule 1: Don’t take a big loss. Cut your losing trades off before you lose more than 1% or 2% of your capital. Or (ideally) reduce your trade size way, way down and if your trade goes bad, work your way out of it. I call the second method “rollover trading” and it is pretty much what saved my trading 13 years ago.
ii) Rule 2: Do what is EASY. Most traders are trying to do something special. Like make 100% per month. Or day trade. Or trade options, even though they trade options. Instead of “trying” to do something, do what is easy.
Ask yourself: What is easy for me to do? It might be: make $1 in profits per week. And if that’s the best you can do, then do that for a few weeks. And then increase that to $2.
Most people argue with me about this. They say, “I am never going to be able to trade for a living on $1 a week.” My answer is this: How well are you doing right now?
Here is the point: You make a living by compounding small wins over and over and over again. Not by making the “big score.” Don’t chase the white whale.
iii) Rule 3: You are the strategy. Most traders do not realize one simple truth. You are responsible for your results.
If you win or lose, it is your fault. It is not the fault of your strategy. Or your broker. Or your mom.
Winners say, “No matter what happens, I am going to make it work.”
Losers say, “I could have won, but something happened.”
Bad stuff happens. It might not be your fault. But it is your responsibility to make it work.
And that’s it.