Trading Strategy

 

Think of what your strategy should be before you enter every trade. There needs to be a context/story around each trade. 

 

If you have a strategy & it is right, the win shall be big. If you are beaten by the other side, the loss should be small. 

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In a nutshell, 

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If our story & strategy is right, we win big. 

If our story & strategy is wrong, we lose small.

If there is no story, there is no strategy & we don't trade.

 

The strategy should have 4 components

 

1.Technicals

2.Fundamentals

3.Risk Management

4.Market Psychology

 

This applies in trading as much as it applies in Formula 1 Race, Cricket or any other competitive walks of life.

 

Let me share an example from 8th Mar 2019

 

Arnam's trading view on GOLD was as below

 

[GOLD] As long as 1308 holds, Gold is heading to 1270. Today's post-NFP price action provides a good risk/reward tight SL opportunity on a SHORT position with a SL around 1308

 

In simple words, this is a short term opportunity to SHORT Gold with a SL of 1308 & target of 1270.

 

This opportunity has all the 4 components

 

1. Technicals : Clearly show that the correction should have ended at 1270 as long as Gold is below 1308. This is a clear high probability technical scenario on the charts/waves etc until Gold is under 1308. Above 1308, new pattern/technicals shall form.

 

2. Fundamentals : While medium term fundamentals are very bullish for Gold, short term is bearish on account of strong economic data for the last few months from the US leading to stronger dollar and weakness in precious metals.

 

3.Risk Management : Current rate of Gold because of price action/buying spree on 8th March is ~1300. Risk is only 7-8 points with a tight SL at 1308.

 

4.Market Psychology : This is most important. With Friday's [8th March] very poor 20K NFP, a lot of traders seem to have impulsively either covered shorts or taken longs pushing the price UP INTO THE RANGE THAT REDUCES OUR RISK and provides a nice risk/reward opportunity.

 

It's a perfect short term opportunity until 1308 breaks. 

Potential Loss of 7-8 points. 

Potential Gain of ~30 points. 

 

This is a complete trading strategy and how Arnam approaches every trade with a story/context. 

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Again,

If our story & strategy is right, we win big. 

If our story & strategy is wrong, we lose small.

If there is no story, there is no strategy & we don't trade.

 

To build a long term successful trading career, this is how a new trader should start building and training themselves.