5 Ways to Make the Next Trade Perfect

Perfection

Trading is a continuous learning journey and that goes without saying that you will always learning something after every trade you make. For some, it will be a conscious lesson and for other, it is sub-conscious. Either way, you will always discover something new about yourself, your system, the market or just your belief system.

Sadly, how many traders actually take the lessons and apply it on the next trade? I believe many of you fail to do that and even I am guilty of it sometimes.

Hence, today we will be discussing how we can take the lessons to make the next trade perfect.

What Does Perfect Mean?

perfect_score_10I realise that the word perfect is a dangerous word, so before we continue any further, let’s lay down some ground rules.

Contrary to what you’re thinking (if that’s what you’re thinking), I like to make it clear that there is no such thing as a perfect system or a perfect trade. While you can find that the market often repeats itself, it is pretty much impossible to find 2 trades that are exactly the same. However, trading is about consistency and consistency is much more important than winning. Hence, that is what we are trying to achieve. How do we make our trading process perfect so that we can be consistent in the long term?

Well here are some of my suggestions.

1. Becoming Mechanical

Robots are the most mechanical beings that we know of and some even say that robots are the best traders. Just to be clear, I am not asking you to be an Expert Advisor (EA) trader but what I’m saying is that you should to be as mechanical as a robot. In essence, you need to be able to execute your trades like a robot – with no emotions attached, disciplined and no bias.

You take the trade when it meets the rules and you should not even think what is going to happen next. Unlike many new or intermediate traders who like to over-analyse the situation thinking as though they have a crystal ball, robots don’t have that sort of luxury. They just trade what ever that comes in front of them that meets the rules. Hence, you should be like that too.

Personal note – I feel that the human mind is faster than any robots in the world. Hence, for that reason, I am not a big fan of EA trading. If it works for you, please do not be discouraged by my personal beliefs. 

2. Make sure a 10 year old Kid Understand Your Rules

UptrendsAs I mentioned above, no 2 trades are the same, and if you have a set of rules to accommodate the trades that you want, you need to have simple rules. In fact, they should be so simple that a 10 year old kid understands it.

I recently had a free seminar as part of my marketing campaign to launch my trading school and gave a simple trading tip to the audience. I told them to look for a chart that starts from the bottom left and ends at the top right of the chart.

Do you see what I mean by simple? Some of you reading this might laugh but this rule has provided more profits any many other rules that I have had.

For more details what writing trading rules, have a look at my previous article Trading Plan: Writing Instructions For Yourself (click here to read).

3. Be Selective in Building Rules

Having simple trading rules is just part of the process but having the right rules is another thing all together.

Many amateur traders have a gigantic list of rules to follow but they don’t realise that many of them are just duplication of existing ones. So they keep adding small little things to make sure they catch the trade but not realising that it may back fire sometimes.

For example, if you are a breakout trader, you might have the following rules:

  • Take the trade if it breaks above previous high.
  • Take the trade if it breaks out of the range.

Do you realise that both the rules mean approximately the same thing?

In fact, I think having rules like this can be confusing because there is space for discretion (which means it is difficult to be mechanical as suggested in point 1). If a range has a false spike, that has already set the previous high which could be outside the range. While both entry criteria are similar the Reward:Risk ratio is completely different.

Instead of picking both, be selective about it and ask yourself if the rules actually make sense. If they are similar, just pick one with the best potential reward and keep applying that consistently.

4. Focus on Execution

If you really want to make the next trade perfect, you should focus on executing your trade flawlessly.

practice_makes_perfectBy execution, I mean trade selection, timing, position sizing and rules enforcement. You need to know your rules like the tip of your finger – you need to be able to visualise what you are looking for and you need to know how to calculate your position size at speed of light. Of course, all these will come with practice. So don’t stop practising, do it even if you are only on a demo trading account.

The day you can execute your rules as fast and as accurate as a robot, that’s when you know you are ready.

5. Trading Journal

Very often, being able to compare the details of your past trades can be a very useful activity. However, you can only compare and make notes of past trades only if you have a trading journal.

Please don’t get me wrong, I have seen traders (though not many) who have been successful without have a trading journal. However, I have seen even more traders who have failed because they do not have a trading journal. More importantly, when I ask how they can improve? They will give me a long list of things of which most were guesstimates because they don’t have a journal to make the comparison.

I have personally developed my trading skills because I constantly used my journal as reference. Without my trading journal, I would not have developed myself this far. Hence, I definitely recommend all traders to have one.

Conclusion

You might think that Execution is the most important element of today’s article. However, remember that being mechanical gives you the guideline to execute flawlessly. Your execution can be made easier by having simple and firm rules. The trading journal allows you to review your trade and to find ways for improvement. In a full circle, all the above points are important. So make sure to pay attention to all 5 of them.

Thank you for reading and hope you’ve enjoyed today’s article.

 

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