5 Strategies That Will Improve Your Order Flow Trading

Posted by on Mar 4, 2016 in Blog

Trading has its ups and downs and there are many things that you can do to make sure that you get more ups than downs. Over the course of your trading you will be able to develop a sense of discipline which will enable you to recognize if the market behaves in such a way that it would benefit you or not. Here are some of the most crucial tips you should live by if you want to succeed in trading:

First advice, size kills. Don’t think you can all of a sudden up your trading size and expect the same returns. You should only change your trading unit under a plan of achieved goals. Furthermore, you should also have plans to reduce your size when your trading is cold – when you book a series of losing trades. Like it or not, psychology plays a big part in trading and often times losing traders take loses personally and try and bully the market by upping their lot size thinking they are going to make back what they lost much quicker.

When you first started trading, didn’t it make so much sense to just trade one contract until you find a pattern of success, before starting to trade two contracts at once? Most people don’t start trading multiple lots right at the start with much success, especially if they haven’t traded before. As you discover your trading style, you may have gone from one lot to two or three lots, to even ten lots. You’d find that as you decide to increase your size, you also change your trading strategy. You may experience taking a few lots off early, add in an extra couple, and then take them off once again. Every time you increase, you are entering a new trading pattern. You will feel different, but if you are constantly successful, you will develop a good level of comfort and be able to push larger.

Second advice, confidence also kills. Remember this, you know nothing that is for sure, so respect the market every time, every second of every day. Never expect anything and expect the unexpected. Concentrate on your position and never hesitate to exit the trade when something feels wrong. It’s basically all about survival. Just like in the real world, you will not survive if you expect that everything is within your knowledge. Keep in mind that the market is like a live, reckless, unpredictable animal, there is absolutely no concrete pattern, so constant adjustments are necessary. So if you find something that works today, expect that it may not work tomorrow. If something stopped being effective, find something else that will work. The best way I could explain this is how surfers respect the water. They never take it for granted. Surfers are excellent swimmers, but they know that even a strong under current can kill them.

Third advice, measure profitability by the number of consecutive days that you profit and not by the amount you profit in individual trades. It’s typical for good traders to say that they “make money every day”. They set their goals by simply saying that their goal is to make “50 ticks per day”. On good days they may make 200 or even a thousand ticks, but the next day, their goal is still to make 50 ticks.
As a trader, you would want an easy target as you do not want to fail often. Failing will kick your confidence down and you want to keep your confidence. Setting a goal on a daily basis will let you pause for a second when you are already there and decide if you want to keep going for that day or not. If it was easy to get there and your trades aren’t so bad, stay and keep trading. If you have been struggling, stopping may be an option. While I am not one to stop, I will often keep trading but cut back my trading size to just one lot so that I could try and get a few winners on my side. It helps my psychology tremendously. I know my method of trading works and if I keep at it, I will triumph in the end. At the very least my mind will be positively reinforced.

Another reason why setting an easy daily goal is a great thing is that when you are down from your goal, you’d know that something isn’t right and you’d know that you shouldn’t let it go too far.

Look back and realize how many days in a row you have earned money, over time, you will know how the trading has gone. You made money 10 days in a row, or 15 days in a row, or probably 5 days in a row. You will have an idea that breaks are possible and you just have to restart the counting. This is reality and this will always be how it shall be. If today isn’t going well, you can stop and start counting from the beginning. The market will still be there tomorrow.

Fourth advice, the only sure way to break your losing streaks is to stop trading for a day or two. The one thing that all traders should accept is the fact that the market will always open whether or not you join for the day. If you feel seduced to trade every time the market is open, then you are exposing yourself into the possibility of a losing streak.

If you ask most realistic traders, they’d say that the most accurate culprit in your losses is ‘overtrading’.

Final advice, do not stop trading if you are on a winning streak. Parallel to the typical advice that tells you to stop trading when something seems not right, you should also be able to detect when things are going really well. If that happens, you should go on with the trading. Disciplined traders recognize when things are going well and when things should be dropped immediately. If it is possible that a trader loses in a trade, it is also possible for him to get the best trade of his life. If you can recognize these events, take advantage of the opportunity and do not get lazy. Do not stop trading early as this shall be the time when you can increase your account balance. You can even level up with your trading size.

Happy Trading!