A key component of being successful in the trading field is by maintaining consistent long-term results. This article is to draw your attention to some of the more nuanced aspects of successful trading that you may or may not have been paying attention to, which can essentially make or break your account.
Though I can't promise you success, if you read and implement the three points discussed below, you should see some improvement in your trading results.
To anyone not aware of the power of staying on the sideline, this is one of the easiest ways to maintain consistency in trading. Immediately it sounds counter-intuitive, but it works.
To know when not to trade, you need to know when to trade. This would involve mastering an effective trading strategy such as price action trading, market structure trading, news trading, or preferably a combination of all three.
By having a good mixture of confluences in your trade setups, you will know your trading edge and when to trade. When you see a setup without a good mixture of confluences, then you'll know to not enter.
An example of this would be if you see a mixture of price action sell signals on Gold, such as a descending triangle pattern on the daily timeframe, maybe a rising wedge on the H4 timeframe, or anything else pointing towards a sell on Gold from a technical aspect. However, maybe the Fed just came out and announced that inflation is on the rise in the US, and fundamentally the USD is not performing too well. This mixture of buy and sell signals could make you step back and stay on the sidelines to see what happens next.
Always remember that by not trading, you are not losing money. Obviously, the long-term goal is to make a fantastic ROI, so eventually, we will have to enter some trades. However, stepping back for a day, or maybe even a week, isn't a bad idea. It allows you to see what's going on and how market prices are reacting to specific events.
You need to work out what you want from this, and how you will realistically achieve this goal. For example, my goal in trading is to make a 60-100% ROI per year. Looking back at my past three years of trading, I've noticed my winning months average out to about 6-10% ROI per month swing trading and barely paying much attention to my positions. Just simply finding amazing setups and letting them run until either SL or TP, while trailing stops when in profit.
Making 60-100% per year is much better than making 170% in February, then losing it all in March. Your chances of becoming successful in this field are improved simply by taking a part-time view on your trading, rather than wanting to be a full-time trader straight away.
You need to develop a consistent trading routine that is devoid of gambling-like behaviour. By becoming organised and disciplined, you'll develop a routine that reinforces positive habits instead of negative and possibly costly ones.
A common negative habit is entering a trade by over-leveraging or even over-trading, you win one or two of these gamble trades, and that easily you've began to reinforce a bad habit that is hard to break. These trades never last, and usually one bad trade can wipe out all your winnings.
An example of a positive habit is checking a pip value calculator and working out a safe lot size to use to enter a setup you have. By doing this, you know you're using a position size, which dependant on your stop loss, you're only risking x% of your account. I personally recommend risking 1-2% per trade.
This obviously goes without saying, but you're better off choosing and sticking to positive habits rather than negative ones. Positive habits lead to positive long-term results and overall performance in the trading game.
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