?Trading Method Importance

6 min read
tarantula fx

tarantula fx

Head of Trading

Dear traders, 

Do you sometimes come to realise that you’ve failed to follow your system and the trading plan? Unfortunately, there is always a gap between theory and practice. The good news is that even the smallest change can be of massive help.

The key aspect is to cautiously monitor how and when you tend to break the rules and set up a new pattern that will help you implement your trading plan efficiently.

The Trading Plan

The trading plan itself is not a shortcut or an instant guarantee for profitable trading. In fact, it is relatively simple not to follow the rules of the plan, both by accident or on purpose.

The main problem is that trading plans are mostly theoretical. They sound good on paper but often cannot compete with the internal pressure to make quick, impulsive decisions in the face of price movement and market volatility. In my view, practical step-by-step guidance is needed to bridge the gap between the trading plan in theory and your actions and decisions in practice.

During my years of actual trading experience, I identified two key concepts that help me the most in successfully implementing goals and plans in general and trading plans in particular.

Dimensions in Trading 

Trading consists of different styles that I call “dimensions”. You, as a trader, need to choose which styles you’re more comfortable with. Whatever dimension you choose, rest assured that knowing price action will complement all styles of trading. We can classify Forex trading dimensions as:

  1. Price Action
  2. Price Action and Indicators combined
  3. Pure Indicator
  4. Harmonic Patterns
  5. Renko
  6. Range bars
  7. VSA (Volume Spread Analysis)
  8. Point and Figure.

Define a Timeframe for Your System

When you choose which dimension you will trade-in, it is time to choose the appropriate time frame. Timeframes are generally divided as:

  1. Scalping ( 1m-5m)
  2. Intraday (15m to h1)
  3. Intraweek Swing (h4)
  4. Intramonth Swing (D1)
  5. Investing (W and M)

Pick the Proper Indicators

Very often, you will come across a system that has dozens of indicators cluttered on the screen. I must say, that is a completely wrong approach. The more indicators you have, the more issues you run into with your MT4.

The main purpose of Forex indicators is to:

  1. define a trend
  2. confirm a trend and entry
  3. place SL and TP.

If you clutter your charts with too many indicators, how will you define the trend, entry and targets? Different indicators will filter out the price too much, and you will either enter too late in a trade or have many bad signals.

Both of these situations can deplete your account faster than you can imagine.

For a proper system, I recommend a specific:

  1. Leading indicator
  2. Lagging indicator
  3. Static or Dynamic support/resistance indicator
  4. Entry indicator — usually a leading one.

Popular leading indicators are:

  • CCI
  • RSI
  • Stochastic
  • QQE

While poplar lagging indicators are:

  1. MACD
  2. RSI
  3. Momentum
  4. ROC
  5. OBV

Live Testing

I personally use the method that might be a bit different from those two popular methods, and I call it “Live testing”. After forward testing has been completed, I open a small account (up to 500e) and test the system by executing live trades while strictly following the rules.

I think that the system can only be fully tested if a trader’s psychology is involved in real market conditions. There is no system that can teach you proper money management — that is unless you learn it yourself.

That is why you should join ecs.Live and see the performance, which should help you stay profitable in the long run.

Cheers and safe trading,
Nenad

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