How To Adjust To Changing Trading Conditions

1
 HOW TO ADJUST TO CHANGING TRADING CONDITIONS
2
Index

• How To Adjust To Changing Trading Conditions
• 1. Trade- Specific Level
• 2. Macro Level

3
(No Transcript)
4
How To Adjust To Changing Trading Conditions

• Market volatility has been picking up lately and
  as a result you may need to consider making the
  necessary adjustments to catch shorter-term price
  moves.
• As traders, we need to adapt, as staying
  profitable in the long-run requires that you are
  able to adapt to random market conditions.

5

• I have written several times about high
  probability trades understanding how to identify
  them.
• High probability trading is one of my keys to
  success as being a trader.

6

• This is one of the few times I will use the word
  casino, or references to casinos on any page
  inside my blog or associate pages.
• As you know, I consider Forex Trading RISK
  MANAGEMENT, as traders we are RISK ASSESSORS not
  gamblers.

7

• However, just like a casino, traders are in the
  business of trying to be consistent and making
  money in a seemingly random work environment.
• The key is to think in terms of probabilities.
•  
• This is actually a little easier said than done,
  because it requires two layers of belief that you
  would initially think cannot coexist.

8
1. Trade- Specific Level

•  
• At this stage, you have to understand and accept
  the uncertainty and unpredictability of each
  trade.
• Let me return to the casino for a moment and talk
  about Blackjack.
• As you know, you never know what cards you will
  be dealt, nor do you know how each player will
  play his or her own hand.
• These factors have a direct effect on the outcome
  of your hand.

9

• Yet, there are some who make money-playing
  blackjack because they understand that each hand
  is STATISTICALLY INDEPENDENT of every other hand
  and that over time.
• If they follow basic strategy, they can decrease
  the house edge and actually generate a small
  profit.

10

• The same can be true in trading.
• We have to understand that each trade is
  independent of every other trade.
• Whether your previous 10 trades were losing or
  profitable trades this has no bearing on the
  outcome of your next trade.
• Once you can accept this, you can easily take
  trades without being adversely affected.

11
2. Macro Level

•  
• You have to understand that over time and with a
  large enough sample size, the probability of
  profit or loss is relatively certain and
  predictable.
• This degree of certainly based on the constant
  variables that are known in advance and most
  importantly, within your control.

12

• Once you recognize the independence of each
  trade and believe in letting good odds
  (probabilities) play themselves out, then you
  will have an easier time at removing emotions
  from your trades.
• (In my opinion, the above in BOLD is one of the
  KEY factors in becoming a longer-term consistent
  Forex Trader)

13

• For example, youre less likely to exit a trade
  early if you know that your trade idea has a good
  probability of being profitable in the first
  place.
• Similarly, youre less likely to lose sleep over
  the outcome of each trade if you know that given
  enough sample size, your trading method will most
  likely work our in your favour.

14

• However, before you place too much confidence in
  your trading method, you must first make sure
  that it has an edge over the markets.
• Without an edge, you are just like any random
  fool who walks into a casino you may win once in
  a while, but over time, the casino will win
  because they have the edge over you.

15

• How do you get AN EDGE? fine tuning, trade
  set-ups, entry and exit disciplines, look at all
  the trading styles you can find and demo them
  until you have your EDGE.
• This all leads back to the TRADING PLAN.. the
  document that I believe every trader should have.
  
• It contains everything that makes you the trader
  you are.

16

• The bottom line is very straight forward,
  consistently profitable traders do NOT rely on
  luck.
• They simply rely on the fact and knowledge that
  their system works because they have put in the
  necessary efforts to make it work.
•  

17
Thank You