Would you like each and every trade to be a guaranteed success? While realistically that’s no more possible than for a baseball team to never lose a game, it’s possible to drastically improve your trading to the point where you almost feel like it’s a guaranteed hit. After all, every year there is a world champion baseball team.
If you use a technical approach to your trading, chances are you have found a technique or method that offers an apparent success rate. Unfortunately, oftentimes, an approach that may seem solid will fail when implemented in real operation and never live up to expectations. The problem is often not the method, but the choice of when to use it. Two scenarios may seem similar, but with one the method will make a profit while the other will lose money. Is there a way to increase the success rate in real trading when you implement a specific technique or method? The answer is yes!
If you have been shown examples of successful trades using a particular method or technique and after reviewing the method it makes sense to you and if it appears to work for others, then it is logical to expect it to work for you. Unless you have been duped by an unscrupulous company, chances are if frequent failures occur, something else is to blame and it may not necessarily be you.
The reality is that most course and book writers on trading have the best intentions when they share their own particular method or technique, but woefully fail in delivery. If this is true in your case, it’s obviously not your fault, but it’s not necessarily the teacher’s fault, either. It may simply be due to a natural human fallacy that gets in the way.
When a person has enough trading experience to develop their own approach, the experience itself often plays a key role in their success and that fact usually goes completely unnoticed if this experienced trader is to write a book or course on the method. successful. The result is that they never fully convey all the aspects necessary to ensure success. How is this possible?
An experienced trader will often subconsciously recognize which trading setups are the most promising and which are not, thus automatically choosing the best ones. It’s not that they’re intentionally withholding something important, it’s just that they’re simply not acknowledging what’s actually helping them make this better decision; the experience itself. Experience often helps us in ways that are subconscious and automatic. This is true when driving a car. Most of us give little thought to how much pressure to apply to the accelerator pedal or brake pedal, we just do it automatically based on what we need.
Furthermore, experience teaches what cannot be learned in any book or manual, and much of it is impossible to convey directly because the teacher himself may not be able to fully define it. He simply knows that if he uses a particular setup, it will result in a good trading opportunity. I cannot record, for example, that he also subconsciously takes note of trading volume, which in turn influences his choice of which setup to favor and actually take.
So someone can teach you a technique or method that really works, but not for you because a piece of the puzzle is missing. This missing piece is most often a rating factor. So what if you have a great technique or method that you’re having a hard time with? Before you write it off, take another look using a rating factor. While you may not know what scoring factors the author of a method or technique uses, you don’t have to. You simply need to use whatever dependent rating factors drive the positive results of the trading method or technique you are using. If you improve the method, you can make a substantial difference in the final result.
A rating factor or rating method is quite different than an actual trading method itself. Rating factors will not provide buy or sell signals, they simply create a filter for another method. This filter is designed to narrow down the scenarios where a particular configuration is most likely to fail. There are many grading methods available so we will focus on just one as an example; using multiple time frames.
Multiple time frames is the practice of using a multiple view of market activity at different levels, usually different time frames, such as using a weekly and daily chart. The goal is to trade in line with the strongest and most powerful trends. On the two time frames mentioned, a weekly and a daily view, the weekly chart would be used to establish the overall stronger direction of the market. If the indication based on the weekly view is that the market is stronger to the upside or appears to be trending higher, then the chosen trading method, which would be used on the daily time frame, would only be taken if it signaled a buy. No sell signal would be taken because it would be against the weekly trend. So in this scenario, you would buy and then exit, but never place a sell to actually enter the market.
The reasoning behind this is that a market is statistically more likely to continue in the direction of an established trend than to go against it. Eventually, of course, it changes direction as all markets will from time to time, but these events are usually much less frequent and far apart. Therefore, trading in line with the trend of a higher time frame drastically increases the chances of success. Naturally, this will reduce the number of available transactions based on a particular method or technique, but the quality of the transactions will be much better.
This technique can be extended by noting the highs and lows set on the higher time frame that could act as support and resistance. These levels can be important indicators of where a market is likely to react, which can support or hinder your chosen method or technique.
The beauty of using this technique is its simplicity. No matter what time frame you are looking at, all you have to do is look for a higher time frame and watch the market trend. In many cases it is that simple.
While much can be said about using this multiple timeframe technique, and of course there are other filtering methods as well, using them can be a game changer even if you are not a very experienced trader. By using the scoring method, you will find that your trading is not only dramatically improved, but also less stressful. You are likely to find yourself hitting home run after home run, a champion trader who sees success as an expectation and not just a hope.