The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
5 Ways to Improve Your Trading NOW
06/05/2014 6:00 am EST
Simple solutions often produce the most dramatic results, writes Markus Heitkoetter of Rockwell Trading, as he shares five simple steps you can take to improve your trading right away.
Why is it that traders have a hard time seeing the forest through the trees? Traders are always so focused on minor details that they fail to see what's really holding them back. Simple solutions often produce the most dramatic results, and in this article we'll share five simple things that will help you improve your trading NOW.
1) If You're Losing Money, STOP Trading
There is a big difference between losing money during a calculated drawdown, and simply just losing money. If you have a trading plan and have expectations when trading your plan, there will be times when you go through winning streaks and losing streaks. There will be losses, and calculated losses are appropriate and expected.
But if you're trading without a plan, losing money, and just “hoping” things will change, STOP trading immediately. Determine why you are losing money, and have a plan for fixing the problem.
2) Review Your Trading Logs and Trading Journal
What? You don't keep a trading log or journal? Shame on you.
If you're not willing to do the “bookkeeping” for your trading businesses, your business is likely to fail...or at a minimum it will continue to run very inefficiently.
If you are keep good trading logs and a trading journal, review them!
- What strategies are working?
- What strategies are holding you back?
- Have market conditions changed and have you identified ways to combat this in your journal?
- Are you making more money in the morning than in the afternoon?
- Is there a market that has become difficult to trade? Etc.
USE your record keeping and experience to make adjustments to your plan! This will dramatically improve your trading right away!
3) Switch to Fixed Exits
Do you trail a move, hoping to capture that monster gain? Then sit there watching the market turn and take you out for small profit or loss? At the end of the day are you saying “if only I would have exited sooner”? If these scenarios sound familiar, fixed exits are a great way to improve your trading.
It's easy to see that big move and think that you're giving up profits, but in going for that big move, you need to sacrifice some of the profits that are already there waiting to be taken. Most traders are drawn to the moves they missed out on, but fail to recognize the moves where a fixed target or fixed stop would have been much better in the long run.
If you're day trading, consider profit targets that are 1.5 or 2 times your risk. If you're swing trading, look at profit targets that are two or three times your risk. Or better yet, consider using volatility exits like we use with our simple strategy and power crossover method. Fixed exits might just be the performance boost that you've been looking for. But they will also make your trading less stressful and actually free up some of your day!
4) Don't Get Impatient!
If you've tested a strategy and have a solid plan, there will be times when trading is slow. The truth is that market conditions change! When you're not seeing the trades or the performance that you would expect from your plan, look for ways to capitalize on the market conditions that are present, but don't drop good strategies and a solid plan just because the markets are slightly different.
Too many traders get lost trying to find out if “the grass is greener on the other side of the fence.” By doing so, they switch from strategy to strategy and go from drawdown to drawdown, without ever realizing the profit potential of a good strategy that was right there in front of them.
5) Increase Your Position Size
WARNING...this is not recommended for traders who are losing (see point #1 above).
If you're seeing consistency and making money, determine if it's time to increase your position size. Many traders get “comfortable” with smaller positions, and forget the power of a money management strategy. If you have proven that you can be consistently profitable trading 1 contract, there isn't much difference trading 10...you just need a strategy for increasing your position size, which is known as money management.
Follow these tips above, and I am sure you will dramatically improve your trading!
By Markus Heitkoetter, Founder and CEO, Rockwell Trading
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