First off, a quick word about an important video I’ll be sending you tomorrow.
Please watch out for this – it shows a technique that made in jaw-dropping £23k in just 9 weeks.
AND I’ll show you how you can get access to this on very easy payment terms. It’s not to be missed, so please watch out for my email with the details.
Home for broken toasters
I don’t know if you’ve come across one of these yet. They are cropping up around the place, but haven’t really taken off yet – a repair café.
It’s a place where you can take your broken toaster… that chair with the wobbly leg… your favourite jumper that the moths got at… and you’ll find tools, materials, and a local specialist to help you fix it.
It’s an antidote to that throwaway society we keep hearing about.
I think it’s a great idea, and have already collected a few cupboards full of broken toys and gadgets at Maven Towers, so I’m ready when one opens up in my area.
Why am I banging on about repair cafes?
Well, how often have you binned a trading strategy when it hit a losing run? Or stopped using it when you didn’t like its success rate or because it just wasn’t making enough money? Or its trading times were awkward for you? Did you try to fix it, or did you just relegate it to the file of ‘mistakes I’ll learn from’?
That’s why this week’s Maven is going to be a repair café for broken, limping and rejected trading strategies.
More often than not, when a system stops working, it doesn’t require a complete overhaul – just a little boost.
Follow these quick fixes to give your trading strategy the kick it needs…
1. Your trading plan
Be honest – are you as disciplined as you could be?
Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well-organised operation has to be predetermined and strictly followed.
There is hundreds of trading systems available, or you can create your own.
Find one that you are most comfortable with and stick with it. Stay organized in your trades and keep records. Unless you’re tracking results, you won’t be able to safely implement the profit boosting techniques I’m about to suggest.
Sticking with a system doesn’t mean that you can’t improve on it though – just that any changes should be properly tested out before they are applied to your live trading account.
2. Let your winners run
‘Let your winners run’ is one of the trading truisms that can sound pretty unhelpful. We’d all let our winners run and run if we only knew exactly how far the market would run!
But there are techniques we can use to maximize the potential of our winning trades, and I’m going to cover them here.
First comes the trailing stop.
If you haven’t used trailing stops before, then they are an automatic moving stop level that moves as your trade moves into profit.
So, let’s say you’ve placed a SELL order with a trailing stop loss 20 pips above at… each time the market moves down by 10 pips… our stop loss will have moved down 10 pips too, reducing the risk on the trade.
Trailing stops aren’t a perfect solution – if the market wobbles around, you can easily be knocked out of your trade.
And all that careful consideration you put into positioning your original stop level, just beyond a key area of resistance, goes up in smoke once your stop loss starts moving!
I prefer to add a trailing stop to a trade once it’s already well on its way to its profit target, so I can lock in some profits, but I feel confident that the market has made its move.
Used wisely, trailing stops can be an excellent way to maximize returns when you believe the market may make a substantial move.
Another consideration for maximizing your winning trades is to use the trend to help you.
If you’re in a trending market, you could consider applying trailing stops only on the trades in the direction of the trend. Or you could give trend-following trades a bigger profit limit.
3. Cut your losses
Rather like ‘letting winners run’, no one would argue with you that you want to cut your losses – but how?
Sure, we don’t want to sit on open, losing positions, keeping our fingers crossed that they’ll come good.
But there must be more pro-active stuff we can do to reduce the impact of losing trades on our profits.
The good news is that there are things you can do…
- Keep detailed records and analyze the results so you can pinpoint the trades that aren’t pulling their weight. For example, are your signals with the lower RSI readings producing more losers? Or is trading the JPY eating into your profits?
- The trailing stops above can also help to reduce losses by locking in profits. If you don’t want to use trailing stops, you can still use a manual version of moving your stop level up when your trade reaches a certain level.
- Kill your losing streaks early by having a drawdown limit. Losing streaks are what can decimate a trading account, and losses have a nasty habit of coming in batches. Set yourself a loss limit (a percentage of your trading fund or a number of trades) at which you’ll stop trading for the rest of the day. It’s natural to want to ‘make back’ what you’ve lost, but if the market is misbehaving, it could be for a reason, and you’ll be safer licking your wounds and coming back refreshed the next day.
4. Use the trend
In trading, we can’t expect to be right all the time. Instead, it’s about balancing up the times we’re wrong (and how much they cost us) with the times we get it right (and how much that makes us).
The trick is to ensure we come out on top in the end.
There’s one dead simple way to give those balancing scales a little nudge in your favour: using the trend.
Look at a longer timeframe to find the overarching trend. Or pop a long-term moving average on your chart. Then, only take trades in that direction. Or use a longer profit target (or trailing stops) on trades in the right direction, while being faster to take profits in trades against the trend.