How Bad Do You Want To Be Good?
How Bad Do You Want To Be Good?
Hello traders! In every Online Trading Academy class I teach, the topic of the trading plan comes up. What is a trading plan? It's a set of rules that you will follow as your trading business evolves. A few suggestions for included topics in the trading plan are as follows:
- Risk Management. From how much of your account to risk on a per-trade basis, to your expected reward:risk ratio, to how many trades you are permitted to do in a day, risk management is perhaps the most important part of your trading plan.
- Trade strategies. Having several strategies covering reversals and trend following trades.
- Your review process. What will you be keeping track of? Since trading is a very personal business, what works for one person may not work for another. I suggest you keep track of the different patterns and setups you are using, the time frame of the charts you are watching, time of day you are trading, etc. The whole idea is to do more of the things that you are good at, and eliminate the things you are bad at. If trading the USDJPY on a 15 minute chart at 2pm EST is not profitable for you, then stop doing it!
The last suggestion I have for your trading plan this week is your practice time. How do you practice trading? One technique we use in class is called the Hard Right Edge game. Difficult to demonstrate in a newsletter, but basically what you do is scroll back in time a few hundred candles, then click forward in time, one candle at a time. At each candle, you ask yourself, "Buy sell or wait?" If you say wait, what are you waiting for? A supply zone, demand zone, retest, etc. etc? There is a very common factoid tossed around - if you want to get really good at something, it will take 10,000 hours of practice. I would prefer to not wait that long!
In your trading plan, I suggest adding at least 20 minutes a day of playing the Hard Right Edge game. The main reason to do this is becoming familiar with charts and patterns that tend to repeat. Think about it like driving in traffic. Every trip you take is different, but overall, very similar. Trading and looking at charts is the same thing! There aren't really that many different variations to the uptrend, consolidation, downtrend, consolidation theme! Have you ever been driving along and somehow KNEW the driver next to you would cut you off? No turn signals, no arm waves, but you knew you would be cut off? How did you know? You've seen the unusual weaving and hesitation before, perhaps the last couple of times you were cut off. Charts are the same way! After seeing enough of them, you almost have a feeling of what will happen next. Why? Because you've seen several variations of the same chart that is staring at you now! By playing the Hard Right Edge game, going candle by candle, you are able to see patterns develop and learn to recognize what will happen next.
The second benefit to playing the games is helping you learn to trust your supply and demand zone recognition. Put on a plain chart with no indicators/oscillators, then draw in a few zones. Scroll back in time and check to see if the zones you have drawn in have been valid before. If they have, congratulations, you are doing it right! The last reason to try this game is to "backtest" a new strategy. Put on the potential indicator(s) you are considering using, and go candle by candle to see if they help or hurt your trading performance. If the stochastic/MACD/RSI super combinations strategy you read about on the internet doesn't work for you on this game, it probably won't help you make money live!
When practicing anything, make sure you practice properly. Every trade has three components - entry, exit for a small loss and exit for a larger gain. Make sure you are "placing" your stop loss and profit targets according to your analysis of the charts, not just your entry.
So, the original question was how bad do you want to be good? Practice this game an hour a day! Try 90 minutes! The more you practice, the faster you can get good at trading! Good luck!
Until next time, Rick Wright
About Rick Wright
Rick studied economics and psychology at Iowa State University, and entered into the brokerage business in 1992. He earned the NASD Series 4,7,9,10,24,55,63, and 65 licenses. He helped grow an online brokerage business which was eventually sold off. Rick has also held positions as broker, branch manager, and several VP positions in the brokerage business.Rick began trading equities in 1997, and was introduced to the Forex market in 2002. Currently trading from home in Dallas, Rick is also a frequent contributor to various TV and business talk radio shows.Rick's goal in class is to accelerate your learning curve of trading, instead of figuring things out with your own money. He will show you several examples of trading mistakes that he and others have made, which cost thousands of dollars in the past so you won't make the same mistakes.You will learn how to recognize the differences between long and short term trends, where to enter trades, and where to exit based on previous price action.
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