Choosing good setups vs price action

Dear community,

I am currently in my 3rd month of demo trading looking to move on to live trading as soon as I consistently achieve 100 pips per week.

My current trading strategy is based around support and resistance levels and I use correlations, trends lines and pivot points to guide me,

Over my short demo trading experience I noticed that I am more profitable when I enter carefully planned trades then when I just jump in because of price action.
How ever I noticed that quite a few traders tend to jump in (or have more trading plans than I do) on moves that I really wouldn’t consider only for a few pips or on moves that don’t appear very solid (correlation wise).

My current profit target is about 30 pips, selling half of my position after 15 and letting the rest run until it reaches 30.

Should I try and improve my skill/win ration on short term trades (5 to 15 min) or should I just stick with my clear directions and longer term trades (average 4 hours) ?

I a way I think I would be more profitable if I stuck to longer term trades but I want to become really good at trading so I fell like not improving my short term trading would be like cutting corners.

Any suggestions are very welcomed.

First, your 100 pip per week target is the wrong approach; it will drive you to take trades you have no business taking. Some weeks I’m in the market every day. Some weeks I get only a single trading day. Occasionally, I lose an entire week. Stick to your trading plan and focus on overall profitability. Often, ‘skill’ is knowing when not to trade.

As for your actual question, there seems to be some weird impulse in new traders to want to be ‘well rounded’ or some rubbish. It’s probably a function of our messed up educational system. Tiger Woods does not worry that not being good at ice hockey means he is not a well rounded sportsman. David Beckham doesn’t worry that his poor golf game means he is not a well rounded athlete. And Mike Tyson does not lose sleep worrying that his lack of wrestling experience means he is not a well rounded fighter.

Focus on developing excellence in your particular niche. The markets reward specialists. Winning 70% of a narrow range of trades is more profitable that winning 40% of a wide range of trades.

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Thank you for your reply.

So you recommend I focus on the ratio of succsessful trades?

It would make sense to stick to what you know best or to what works at least until a certain level of skill and then play with other ideas and strategies.

The end goal of trading is to be profitable, so that should be your metric for success. If you have had two or three consecutive months of profitable demo trading, it is absolutely reasonable to consider going live with that strategy.

Your ratio of profitable trades - often referred to as your ‘hit rate’ - is an important piece of information, and a factor that you should always be striving to improve. But some strategies are profitable at a 30% hit rate, while others might require a 50% hit rate, so you can’t make generalizations about what hit rate you need before you go live.

At the end of the day, profitability is the only test that matters.

[quote=“onlythebrave85, post:1, topic:133593”]
I am more profitable when I enter carefully planned trades [/quote]
That, in my opinion, and personal experience, says it all.

A consistent and optimal trader has confidence in what they are doing. Confidence comes from, and leads to, being successful in the careful selection of trades. Not all trades are winners, of course, but the quality winners are real winners and the quality losers are small both in number and size.

A carefully planned trade also extends to money and risk elements as well as direction, entry and exit.

Two inevitable requirements of trading only quality set-ups are patience and discipline (often called the boredom of trading)

When both consistency and confidence are built on these elements then you increase your position size and then you are trading seriously.

Maverick trading leads to giving back most of, or even more than, you earn with your quality trades, and destroys your confidence and enthusiasm quicker than you can imagine.

Just my take on it…

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Drekieyja2h

My profitability is pretty low right now, 30%, usually I have one or two good trades 30 pip per day and then 7 - 8 bad trades.

I keep the focus on overall profitability, was planning to go live in March and then start a trading journal but I think I will keep on demo trading until I am profitable for at least the whole of February and then ask for some feedback from the lovely people in this community.

Manxx

Yes, it is boring and I think my problem came from the fact that if other traders take positions all the time I should be able to do so as well and be “EVEN more profitable”. Psychology 101 got the best of me.

I will keep on using my own strategy and become more efficient at it and then I should have a different view of the whole picture.

Thank you guys!

[quote=“onlythebrave85, post:6, topic:133593”]
I think my problem came from the fact that if other traders take positions all the time I should be able to do so as well [/quote]
Yes you certainly can take many, many ,many, more positions - just like other traders - if you really want to…but it doesn’t take long looking around this site to realise that most “other traders” in retail forex also lose all their money!

Your attitude to taking carefully planned trades is absolutely spot on and you need to cherish that criterion as no.1 on your list.

In your early stages, identifying quality trades and, even more importantly, ignoring those “maybe” trades, or those “gut feel, intuitive” trades, is far more important than “how many trades per day?”, “how many pips per week?”, “how many currency pairs?”,“what ROI?”,etc.

You need to develop a strategy and an approach to your trading that you are confident in, and even feel proud and possessive about. The amount of profit that is rolling in is not important at this stage. Once selective, quality trading becomes second nature then you can start to look at your profits - which I suspect you will find are already accumulating :slight_smile:

Your attention to carefully planned trades is a rarity on this site - and that makes you stand out from the crowd…and in retail forex, where most people lose, that is an entirely enviable asset! Well done! :slight_smile:

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I think, 100 pips in a week is a good weekly target! May I know your pairs number please?

Good to hear about you are starting trading in a perfect way. Demo trading is the right way of starting forex trading. I think good setup and price action both are equally important. Price action is a very strong trading strategy. I think the problem is not with the price action strategy. Your target is not to only achieve your target which is 100 pips per week. You should also focus on the ration of winning and losing trades.

@anon46773462 Thank you for the encouragement!

I realise now that while starting something new you need to create the right habits, especially since there’s no one to actually shout at you when you do something wrong so I will take your word seriously and focus more on the quality of each trade rather than pips.

A few years ago a lost quite a bit on shares so I got a feeling of what trading feels like. I’m a lot more cautious (and wiser) now (or I would love to think so :grin: )

@Luke_Ronchi My pair numbers? I trade EURUSD, GPDUSD, EURGBP, USDYEN, EURYEN and that’s about it.

@Logan_Gabriel Thanks! It seems that all of the more experienced traders guide me in the same direction. Quality over quantity it is.

In other news I made a complete mess of the NFP release today; most people shorted the EUR on pivot at 13:38 something which was just not obvious to me.I assumed given the size of the move it will give everything back in the next few minutes; it eventually did but in a matter of hours.

The time when you think you know stuff and the markets bring you back to earth :joy:

Hope you guys had a good trading day!

Interesting, I never used USDYEN and EURYEN! Thank you very much for your reply.

Using the dolar index in combination with those 2 yen pairs can give a good indication of what’s happening on the day and witch curency is stronger/weaker.