Why Your Trading May Not Be Improving

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Why Your Trading May Not Be Improving

Maybe you have been trading for a while; you have some great stretches, but also bad ones, and overall you just aren’t making money or improving.

In any endeavour, when we don’t do something well we seek out more information. There is lots of free information on the internet, so it seems like a logical thing to do. You tell yourself that if you learn something new about trading, maybe that will get you over the hump and into the small group of successful traders. But it isn’t working. Why?

Information is important to get you started in trading, but once you know the basic concepts, just piling more and more information into your brain isn’t likely going to help your trading.

When you started a new job did they just sit you down and tell you to read a book on how to do your job? Likely not. While they may have given you some background information to read, you likely had “on the job training.” This is where someone is there with you, to correct your mistakes and show you the right way to do something.

For some reason, people don’t think this way when it comes to trading. They want lots of information, but don’t seek out personal help from others. Trading, like any career, should have some on the job training or mentoring.

While getting a professional trader to help you may not be easy, that doesn’t mean you can’t create your own strategy, tell a friend what it is, and then get them to monitor you while you trade.

For instance, say you have a problem with overtrading, and it is one of the reasons you know you aren’t as successful as you should be. You have a strategy that seems to work when you implement it, but then you make all sorts of “extra” trades–gambling type trades–which have nothing to do with your strategy, and generally these trades don’t turn out well. You tell yourself over and over again you will stop doing it, but every day the urge occurs and you yield to it.

One way to improve your trading, but also not have to dish out a ton of money to a professional, is to simply ask someone you know to help you. Get over and shame you may feel and realize it is for the benefit of your trading, you, and potentially your family.

Tell this person your strategy and what your main problem is. Even if they aren’t knowledgeable about the markets they can likely let you know when you are about to do something you aren’t supposed to do (because you told them what you are supposed to do), and say “DON’T!”

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Having someone to make you aware of your behaviour, in real-time, and make you re-think the mistake you are about to make is one of the quickest ways to rid yourself of a bad habit. Having this person sit with you for several trading sessions in a row will likely help you overcome issues that would take weeks, months or even years to overcome on your own.

Of course, in order to do this you will need to have a clearly defined strategy which you can explain to the other person.

Final Word

If you can a get a professional mentor, it will likely be the quickest to improve and overcome trading issues you may be having. That isn’t always an option though. If you have developed a trading method but are struggling to implement it, ask someone to help you with it. Explain the system to them and tell them to alert you when you aren’t following the plan. Tell them to be firm with you; this is something you need to overcome, and habits are hard to break.

Let them know you’ll pay them back for their service when you are making money.

5 Ways To Increase Your Trading Performance

5 Ways To Increase Your Trading Performance

Trading is all about making money and one of the most asked questions is “How can I make more money?”. There are mainly 5 different ways ‘to make more money’ in trading that we will discuss in the following article. We will lay out the possible problems that you might run into and what to be aware of when trying to increase your trading performance.

1. Trade More Instruments

Once you have a tested and proven trading strategy, the most obvious thing to do to get more trades and increase your performance is to add more instruments to the ones you are already trading. Whereas this seems like a smart thing to do, it brings a variety of problems that will not only not increase your performance, but will undoubtedly result in a lower trading performance. The reasons why just adding more instruments to your arsenal and keep doing the same things won’t work are the following:

  • Different instruments behave differently regarding overall volatility and general price behavior. Therefore, the stop loss and take profit strategies that work on one instrument, may not work on another one. Whereas one instrument follows certain patterns accurately, a different instrument may not respect technical rules at all, or respond to a different approach.
  • Furthermore, adding correlated instruments increases risk to your overall trading performance. When trading correlated pairs, price moves similar and, therefore, the outcome of trades will be similar. In short, by trading correlated instruments you mainly just increase risk due to a greater exposure.

The graphs below show the percentage price change of 4 different instruments, three of them are big US corporations and included in the Dow Jones Index. You can see that although they are included in the same index, the way they move and behave is significantly different. Thus, taking one profitable strategy and blindly applying it to different instruments will not automatically result in an increased performance.

2. Trading lower timeframes

The next thing on the list when thinking about increasing trading frequency and trading performance is just to change to trading lower timeframes. Isn’t it obvious that when you get one signal every few days on the daily timeframe, you should see a potential setup daily on an intra-day timeframe!? Trading lower timeframes seems an easy way to get more trades and, potentially, more winners, but is it true? Here is what you have to keep in mind when moving down timeframes:

  • The price action on lower timeframes is completely different. Intra-day spikes can be significant and the impact of news announcements can result in large price spikes that do not change overall direction, but shake traders out of their positions.
  • The psychological pressure increases and the likelihood to fall for emotional trading errors rises sharply. When the time between trade setups is small and traders see markets moving rapidly throughout the day on lower timeframes, they are more prone to revenge trading and interfering with their trades.
  • A solid trading plan is key when trading lower timeframes. When markets move fast, a piece of unexpected news surprises the markets and things get hectic, you do not have the luxury to sit back and think long about what to do. You need to have a trading plan in place that tells you exactly what to do and when to do it. If you do not have a trading plan, trading lower timeframes is an impulse game.

3. Increasing Position Size

Improving your position sizing is a great way to take your trading to the next level. You can not only increase your equity growth, but you can also limit and regulate drawdowns by applying a better position sizing technique.

Pro:

  • You do not have to study new instruments and you do not have to add the psychological pressure that comes with trading lower timeframes.
  • Once you have a tested and proven strategy, taking a larger position can increase your overall performance.
  • You can limit drawdowns and reduce account volatility by following a flexible position sizing strategy.

Cons:

  • Only when you have tested and evaluated your strategy, you can increase your position size. If you haven’t collected data about your performance, increasing position size will result in a disaster.
  • Only when you KNOW, and by this I mean tested and calculated, your actual winrate and the likelihood of losing streaks, you can adjust position size. Only if you can answer the following questions you should think about increasing your position:
    • What is my winrate?
    • How likely are 6, 7 or 8 losing trades in a row?
      • Every trader will experience a losing streak of 6, 7 or 8 trades. Can you deal with losing 30% of your account on 8 losing trades when risking 4% per trade?

4. Adding a Second Strategy

The fourth possibility to increase trading performance is by adding a new trading strategy. By adding a new trading method you do not have to worry about correlated instruments increasing your risk, lower timeframes adding psychological pressure and increased position sizes that could ruin a trader, even with a profitable trading strategy. But, and there is always a but, adding a new trading strategy does not only have positive aspects.

  • Learning a new trading strategy can take months or even years and it may interfere with your current trading performance and your focus.
  • Is the new trading strategy really completely different? If not, you are likely to get similar trading signals and, therefore, not add an independent variable, but increase the frequency of similar trades.
  • But, if one trading strategy performs well in a trending market, adding a trading method that allows you to trade range bound markets profitably will get you the best of both worlds.

5. Improve Your Current Strategy

All previous points have their pros and cons – some have more cons, some less. But what if there was a way to increase your trading performance without having to worry about potential problems or traps you might run into? Although improving your current trading strategy is easier said than done, there are only few, if any, downsides to increasing your trading performance this way. The following points can serve as a guideline how to follow through:

  • Tweaking your current trading strategy involves a lot of data tracking, analyzing and trial and error. In short, it includes all the things most traders do not like to do, but that will make the difference between the average losing trader and the professional winning trader
  • Possible ways to tweak your trading strategy is by optimizing entries, stop loss and take profit placement, trade management, holding time and being aware of emotional and psychological shortcomings.
  • Improving your trading strategy takes a lot of time and trying different approaches. Each time you change a parameter, you have to collect new information and data from a sample size of trades before you can evaluate whether the change increased the performance. This process takes a long time and requires a lot of work from you which is the reason why, although it is the best way to make more money, few traders will do it.

The following posts show you how tweaking a trading strategy can be done in a simplified way:

Conclusion

All previously described methods can help you increase trading performance and it is up to you as a trader to find what is working for you. However, this article has the goal to open your eyes for the pros and cons each approach has and what to be aware of when trying to increase your trading performance.

Tips to Improve Your Trading Mindset

Trading the financial markets can be a tough journey, especially if you constantly feel that your mental energy is depleted and that you have a difficult time to focus on the markets.

Fortunately, there is an effective way to return the excitement that trading carries along – by improving your trading mindset. In this article, we’ll take a look at what a trading mindset is all about and why it has such a large influence on your trading performance.

Are you short on time?

Here is a list of the most important points to develop a positive trading mindset:

  1. Develop an effective morning routine. Wake up earlier than usual. Working out or mediating early in the morning can help you to approach the market relaxed and calm.
  2. Never stop learning. A financial market education forms the foundation of any successful trader.
  3. Always have your losses under control. Develop effective risk management rules.
  4. Keep a trading journal. Spot common mistakes and fine-tune your trading strategy.
  5. Observe others. Replicate successful strategies and learn from the mistakes of other traders.
  6. Control your emotions. Don’t get overly emotionally attached to a trade and practice your trading discipline.
  7. Remember that the market is neither moral nor immoral – it’s amoral. Losses are nothing personal, and even professional traders take a hit from the market from time to time.

What is a Trading Mindset?

Markets are neither moral nor immoral – they’re amoral.

The markets have no emotions at all, so it’s completely up to the traders how they perceive the market to be. If your goal in the long run is to attain and maintain the status of a trader, it’s very important to develop a mindset that helps you observe the market from an unemotional perspective.

Your mindset will ultimately define your reactions during losing trades or large profits – will you be able to stay calm during these events and avoid reacting based on emotions?

This is what a well-rounded trading mindset is all about. A disciplined trader will never let emotions to interfere with his or her trading decisions. However, bear in mind that it takes much effort to achieve the status of a disciplined trader. You don’t become a professional overnight in any business, and trading is no different. As one famous trader said,

“… don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.” – Paul Tudor Jones

Why is a Positive Mindset Important?

As we already said, the market has no emotions at all. All emotions come from market participants, who are still predominantly humans. This is why chart patterns and trend-following techniques work so great in trading – they rely on well-known patterns of human behaviour and take advantage of market psychology.

However, you may have heard that 90% of traders lose 90% of their trading funds within 90 days. It’s important to ask yourself what are the main psychological traits that distinguish the remaining 10% of successful traders from the majority of other market participants.

All of them humans, but a small group of traders still succeeds to significantly outperform all other traders combined. While it’s very unlikely that they have found the holy grail of trading, the truth is that one psychological trait comes very close to it – a trader’s mindset.

Watch: Traits of Top Trader

Top Tips to Improve Your Trader Mentality

If you feel that your trading mindset needs a push, follow these top tips outlined below to learn how to survive the trading game.

#1 Get in the Right Trader’s Mindset

Traders can benefit a lot from approaching the market from a calm and relaxed mentality. If you have proper risk management guidelines in place, there is no need to worry about trades at all. In the end, what can go wrong?

Even if a trade hits your stop-loss level, it’s not the end of the world. Losing trades happen all the time, and even professional traders have a winning rate closer to 50% than you might think. With a high enough reward-to-risk ratio, which is the ratio of your potential profit and potential loss on a single trade, you’ll still end up in profit even with a 50% winning rate.

A losing trade doesn’t mean anything personal. Markets go up and down all the time, and you need to have faith in your market analysis. Remember, markets don’t have emotions, and traders who avoid succumbing to their own emotions tend to significantly outperform traders who let their emotions interfere with their trading decisions.

Having a morning routine may also help a lot to approach trading relaxed. Try waking up earlier than usual, work out or meditate and sit in front of your trading desk with faith in your analysis and risk management principles.

Read:

#2 Keep Learning

Education is probably one of the most important factors that separate successful traders from unsuccessful ones.

Even if you already have the right mindset, you need to have a solid foundation of the markets to understand the reasons behind certain price-moves or market reactions. While there are many concepts in trading worth learning, your best bet would be to keep learning until you find the tools that best suit your needs and trading style.

Try to spend at least one hour before bedtime to read a trading book in order to get an insight into the practices of other successful traders. In addition, online trading courses are also a great way to increase your knowledge about the markets.

Check Out:

#3 Don’t Let Losses Get Out of Control

A common mistake among beginners in the market is the way they manage their losing trades. Usually, novice traders wait for a losing trade to become profitable again, as they don’t want to close the trade in loss. As you can see, emotions are again interfering with rational trading decisions which can be very costly in the long run.

The following table shows how much return a trader has to make to return to his initial balance, after losing a certain percentage of his trading account:

Amount of Balance Lost

Amount Necessary to Return to Initial Balance

If you lose 50% of your trading account, you’ll have to make a 100% return to be break-even! This can be a very tough undertaking.

Instead, try to manage losing positions like a professional trader, who are very impatient with losers. If one of their trades is slightly in minus, signalling that their trade setup isn’t playing out as expected, successful traders will close that trade and move on. They cut their losers short, and let their winners run. In the long run, this can make a real difference to your bottom line.

#4 Keep a Trading Journal and Make Regular Retrospectives

Another great way to attain a successful trader’s mindset is by keeping a trading journal. Trading journals are just like regular diaries – only that they include the trades you make. Journals consist of journal entries, which can cover anything that you think might be important about a particular trade.

Standard journal entries include the currency pair that you trade, the reasons why you got into a trade, its entry and exit levels, and additional market commentaries. Once you close your trade, develop the habit to update its journal entry by the trade’s profit or loss, and any additional comments which might give an insight into the performance of the trade.

Making regular journal retrospectives can reveal a wealth of information about your common trading patterns that lead to losing trades. Maybe the majority of your pullback trades turned into losers? Your trading journal will show that and help you to improve your trading skills.

#5 Observe the Actions of Other Successful Traders

One of the best ways to learn a skill is by observing the actions of people who have already mastered the skill. Trading is no different from any other skill, and replicating the process and work routine of other successful traders can make miracles for your trading mindset.

Finding a role model among successful traders might be difficult at best, but fortunately, there are dozens of excellent books that you can pick to get an insight into the mindset of those traders. “Trading in the Zone” by Mark Douglas is a classic that every beginner in the markets should read early in his trading journey. Another exceptional book which could help you in attaining an effective trader’s mindset is Stephen R. Covey’s “The 7 Habits of Highly Effective People.”

#6 Control Your Emotions

Emotions play a big role in trading. In an ideal world, there would be no emotions attached to the markets and all traders would analyse trade setups from a completely objective standpoint. Nevertheless, the majority of traders are still humans with emotions such as fear and greed, which more often than not interfere with a rational decision-making process.

Inevitably, there is fear involved with a losing position and greed when a position turns green. Our job as traders is to learn how to control those emotions so that we can maintain a clear picture of the market and make rational trading decisions. This is how Colm O’Shea, a trader at George Soros’ hedge fund, describes his boss’ complete absence of emotional attachment to a trade:

“I remember”, he says, “one time he had this huge Forex position. He made something like $250 million in one day. He was quoted in the financial press talking about the position. It sounded like a major strategic view he had. Then the market went the other way, and the position just disappeared. It was gone. He didn’t like the price action, so he got out. He doesn’t let his structural views on how he believes the market will play out get in the way of his trading.” – Colm O’Shea

#7 Remind Yourself that the Market Doesn’t Owe You Anything

One common mistake that many traders continuously make is overtrading the market. Especially after a trade goes wrong, some traders feel the urge to chase the market for trade opportunities, only to accumulate hefty losses by the end of the day.

This is not how the market operates.

The market doesn’t owe you anything, and it might be a wise decision to repeat this mantra every morning you wake up. Some days there are extremely lucrative trade setups, and the other days there might be nothing.

This point strongly relates to the previous point of controlling your emotions and having trading discipline. Don’t feel angry at the market once a trade turns into a loser – remember, the market has no emotions about you at all.

FAQ Section:

  • How to develop the right mindset when trading?

Developing and maintaining the right trading mindset is crucial for long-term success. While it can’t come overnight, certain techniques can help to accelerate your performance.

Some of them are developing an effective morning routine, educating yourself about the markets, having losses constantly under control, keeping a trading journal and making regular retrospectives, observing and replicating the actions of other successful traders, controlling your emotions and not getting too much emotionally attached to a trade.

  • How not to sabotage performance?

While there are many reasons why traders sabotage their performance, arguably the most destructive one is letting emotions to interfere with your trading decisions. Fear and greed are common emotions that many undisciplined traders have all the time while trading.

Would you let fear of losing those $1,000 of unrealised profits interfere with your analysis, or would you let the trade run until it reaches its initial profit target of $3,000? Having faith in your trading strategy and analysis is very important in maintaining a trade’s reward-to-risk ratio.

  • What are some brain exercises for traders?

In my personal opinion, the best exercise you can get is both joining a community such as My Trading Skills and practicing trading on a demo account. Whether it’s a demo account or real account, the best way to gain experience and trading knowledge is by constantly following the market and questioning why a trade is performing good or bad.

Speaking about brain exercises for traders, did you know that you can even trade during weekends?

Well, not always with real money.

Simply open a chart, scroll it to some past date, and make a few paper trades to fine-tune your trading strategy. The good part about this approach is that you can cover weeks of price-data in just a few hours.

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