You remember the 2Pac’s song – Me Against the World – title of famous rapper’s song, who tragically lost his life, sometimes reminds me of how each of us trader are sort of warriors standing against the rest of the trading world. If you and your colleague have opened sell position today, you might be at different sides the very next day – one in a long, another in a short trend. Your end doesn’t necessarily have to be tragic.
About a month ago I talked with a friend of mine, a pro trader. We were discussing random things while we were trading, each with his own rules and strategy. We commented the actual circumstance at the market and out of nothing we had a conflict. He was persistent with the idea there was a slight buy trend about to kick in few hours while I had somewhat different thoughts myself.
As you might have noticed, or not, professional traders are really stubborn sort. They have been using their own proven Forex strategies for years, not listening to any advices the hear from other traders or even completely ignoring them. As it was a lost battle for both of us before it even started, we decided to make a little competition over the period of a week, to make the end results more reliable.
Strategies Instead of Bullets
So we started to trade under exactly the same conditions, at the same time, at the very same currency pair. The goal was to, what a surprise, make more pips than another one. As we encountered heavy bearish trend we both profited about 150 pips in five days trading, within a single week. Hence it was draw, there was no winner. I simply have to tell you I had negligibly small advantage of few pips.
In the end I realized we were actually fighting a completely irrelevant battle about a single trade, market circumstances and whether it was a better time to open a buy or sell position. The argument was absolutely irrelevant as neither of us pay attention to whether position is going to positive or negative trade. Yeah, I know it sounds stupid. Let me shed some light here.
If you have a strategy that detects the points where trend reversal is going to happen, the price will either pass the point of trend reversal or continue as it goes, you have done the most of the job. Still blurry? Check out the picture below.
Above is the standard chart. At this example, I’ll explain you why I don’t crack my head with whether my trade will be successful or not.
Assuming my strategy points the upcoming buy trend, this is how my process of opening position looks like:
Strategy indicated there is long trend upcoming.
- Strategy alerts me that price on the grey line (buy here) will be having troubles carrying on.
- I set pending order at the buy here point.
- I set the stop loss on the red line.
- I set the take profit on the green line.
This is how average process, that I use at day trading strategies, looks like. If strategy breaks the take profit and stop loss I lose. The loss is, comparing to take profit, far smaller.
If I have negative trades three times in a row with a fourth one being positive – I am still profitable. Not much of course, but it is the most important that I am making and not losing money. When you add on a good money management, the profit comes even bigger.
If I have 50% profitable trades, my income is fairly big. Very big. Considering that my positive trade rate moves between 70% and 80% I am completely calm when it comes down to negative-trade-season. It is a fair advantage to be capable to stay calm after 3 negatives in a row, knowing the fourth one will jam them back up and cover the losses.
Now, I’m telling you all of this because, when I was a starter, I used to have such energetic discussions with the other traders regards the price movement at the market. If you ever get into a similar situation remember that you are wasting your time and nerves at absolutely irrelevant thing.
Your goal should be to focus on your strategy and make it profitable in a long run. Once you manage to make one, it will not matter whether you or your colleague are right when it comes down to a trade’s next trend. If you both dispose of a profitable strategy, both of you are right, hence once you will be, another time it will be another person, and so in a circle.
The best example of a hardcore time waste are forum threads discussing the price direction in period to come. There are threads where tens of traders are discussing giving their more or less relevant opinions. Don’t stuck upon such traps, instead focus on yourself and developing your strategy.