I think that two new trading rules should be:
- Wait until the market gives you a clear opportunity.
- Be prepared to pass on a trade if you never get that opportunity.
Two trades are working for me at the moment — long sugar and short AUD/NZD. My entry to the latter trade was terrible, and the former one looks good so far. With hindsight, AUD/NZD later offered a clear opportunity to get in, and the reason I feel good about sugar is that I waited for one. It might be that neither of these trades goes my way from now on, but that is not the point. If you wait for a clear opportunity you are more likely not to get stopped out right away, and you will have a better entry level.
Here are some illustrations. First, long sugar:
Here I entered close to the support level, having waited for the market to come back my way. The support had held for a couple of days. This was good.
Now, short AUD/NZD:
Here I rushed the entry. Even though the trade is now going my way, I have not made much profit — because the market is not down that much from my entry level, and because my stop is quite wide. I should have waited for a better entry level.
Finally, a trade from today that I have not written up yet: short EUR/NOK:
Here the mistake was to rush into the trade without waiting to let the market test the resistance. This wasn’t a bad trade, but I could have been a bit more patient. I have been stopped out, as you can see.
Some trades will always go wrong. This is all about stacking the odds in your favour.
Charts from IG Index.