What type of trader are you? Swing, Scalper, Position Trader? Whatever classification you label yourself, the importance of sticking with a style is going to determine whether you are successful or not...
I will discuss what I learned jumping from trading style to trading style. By not sticking to one method and always changing whenever I experienced losses, I developed into a irrational, illogical trader which cost me so much money and time.
"Maybe It's Going To Change Direction?"
I will take it back to a time when I was trading USDJPY, you probably have gathered that USDJPY is the one pair I stick with. Anyways, I woke up and prepared myself for the London Open. I saw that USDJPY was respecting an area and I was ready to enter for a quick 5 pip scalp. Now prior to this entry I had made the conviction that my trading style was scalping.
Or was it?
I had witnessed USDJPY behave a certain way that gave me the impression that the market makers were looking at taking prices higher, so I made the entry.
The image shows my entry, it is 0.6 pips in profit. So we are off to a good start. Target profit is in sight and we are looking to have another successful trade.
However for some reason, something came over me. I saw the position demonstrate strength, so I moved my target profit higher. I became greedy.
This trade eventually went south, I went from scalping for just 5 pips, with a target profit set, to a swing trader hoping to get as much as I can from the move.
If I had stuck to the original plan of taking 5 pips and not think "i could get more" I would have taken a quick victory and prepare for the next move. Because I had changed from a scalper to a swing trader in an instance, It cost me.
Why Did I Do This?
Stick To What You Know...
I sure learned a thing or two from this trading scenario.
Now the following experience can give all new traders insight to why they must stick to a methodology and a trading style and remove all elements indecisiveness which in turn can lead to be consistent.
The Charts above show that I came to the trading desk with the intention of scalping. Why did I become FOMO ( Fear Of Missing Out) and deviate away from my trading approach and start seeing the markets from a swing traders perspective? If I had stuck to rules that I had laid out, I would not have set myself up to think in terms of Expectation and assume that if I stay in the trade then it will go in my favour. This is where a trader will set himself up to experience loss after loss, unless they are regimented with their trading approach and follow it to a T.
Looking Back, the following points will describe the reasons as to why you must stick with your approach and not change. Doing so, you are installing discipline and objectivity within your trading and you prevent yourself from developing emotional triggers that lead to irrational and illogical decisions.
1) Decide what type of trader you are or desire to become. Be flexible, not all trading styles are suited to all. Whatever the style. Commit to sticking to it. Give it a chance. give yourself a sample size of trades with the style you have chosen. If it's not for you, change it and repeat until you are happy.
2) When you have chosen your style, Stick to the practise and mindset of the style you have chosen. Do not trade as a scalper and then think you can become a swing trader. A scalper eliminates the exposure of the swings by the market makers, where as a swing trader anticipates retraces with the idea that price may resume favoured direction.
3) Be very objective and systematic. Trade your chosen style like a robot. If your trade is losing, close it, re enter. Keep exposure to a minimum. Do not allow yourself to develop the FOMO and say to yourself "ill wait this one out" or "it's bound to return, ill see if i can recover". If your position is making you feel uneasy, it's time to close.
As easy as it's said, the above key points are difficult to practise in real life. However, the operative word being practise is what is required. Develop the habit of execution of trades and closing losers quick and taking profits where necessary. By having the mindset of letting profits run, you effectively expose yourself to the swings where a profitable position is then an negative one. Take whatever the market gives you...Remember, in the face of uncertainty...You had no idea the market would give you those profits. Take what is given.