I was sat in Canary Wharf recently getting a coffer after meeting with friends for lunch. Whilst having my coffee I found myself listening in on other people’s conversations.
A few things struck me.
The first thing was the amount of people who are so focused on keeping themselves busy with trivial things… I know from my previous experience the amount of effort that goes into some of the most trivial tasks in business. The second was how stressed all these people looked.
A lot of new traders are not dissimilar to these individuals.
Glued to their screens waiting to hit buy and sell as quickly as possible. A challenge arises with this, the issue of over trading; one major mistake new traders make is their need to place lots of trades.
This week I placed a grand total of four trades. That’s all. Yet I made 300 pips with those four trades.
I wasn’t glued to my screen, I wasn’t worried about my positions, I wasn’t intricately plotting my next move, about 3 hours was how long I spent looking at my screens to place those four trades.
I was only interested in the best set ups with the highest probability and best risk reward, that’s the trick.
Unfortunately, as soon as you get into the habit of always trading you tend to find you become less profitable, this is because your brain tends to trick you into seeing things that aren’t there, or into believing that an analyst with a really high success rate will definitely be right this time.
When working with new traders, or mentoring them, I always start them with a simple rule I want to share with you now.
Set a limit to your trading, X pips a week (it should not be more than 100 when starting out). As soon as you hit your target you’re done for the week.
If at the end of the week you’re negative, carry the loss to add to next week’s target but never carry it over one week.
I do this to get people into the habit of only taking the best trades that matter, if you release the pressure of trying to make a silly amount of pips or money and limit the maximum the majority of people will become more focused on only doing what is required to hit that target.
This becomes second nature and you’ll end up worrying less about the targets and more on the best set ups. The other trick I often use in a similar way is to limit the number of trades you can take.
This needs a little bit of experience based on strategies but for instance, if you are swing trading, more than one trade a day averaged over the week should be more than enough.
The thing to remember is consistency, if you can achieve ten pips a week, you can earn a substantial amount of money with the right leverage and money management.
The skill of placing a trade and walking away is often referred to as set and forget. Place your orders, your stops and your risk reward profit targets and walk away. Only check the trades periodically; if you’re trading off of daily charts then checking once a day is all you need to do.
The best piece of advice I can give you, is to stop trading and start enjoying life, focus on the important things instead of overthinking your positions, it can make you far more profitable and significantly less stressed.