Beginner traders who start trading often think that every new candle on the chart indicates a new, potentially profitable trading set-up. If the candle is green, they think of a long entry. If the candle is red, then they think of a short entry. However, in real trading every candle is not traded. Waiting for too long with your trading can be an integral part of your trading discipline.
In pure experience, when I started viewing even the smallest movement as an opportunity, added unnecessary entries. While some trades turned out to be profitable, many trades were taken only because there was some movement in the chart. This makes decision making complicated.
Firstly, a better method is to define your trading setup. Setup may be a combination of entry condition, market direction, invalidation point and risk level. If all these things cannot be decided in advance, then taking trade becomes just another valid decision.
Best setup does not mean guaranteed profit. It simply means that the prevailing market conditions are in agreement with the rules of your tested trading system.
Patience is crucial here as not every candle has quality setups.
Understanding the overall market context is very helpful in identifying each trading setup. It is often misleading to make decision based on one candle alone. What direction price is moving, where are key levels, whether the market is trending or ranging it helps in understanding each setup.
Suppose the agar market is making significantly higher highs and higher lows then some traders might look for buying opportunities. But this does not mean it will be sensible to buy on every bullish candle. They might need to wait for confirmation as per their trading system for entry.
In this way, not all red candles would be a good sell signal during down trend. Price could be at a significant support, where even a temporary bottoming could occur.
A good habit that one can develop from mere experience has been to set up the trade first and then think of placing order. Instead of rushing for order placement, observing the chart can help in better decision making.
No weakness trade being switched out under unclear market conditions. Getting rid of extraneous positions in capital also trade proses.
When selecting best trading setup trader should not ignore risk-to reward ratio. Opening a trade on the grounds that price is likely to move in the predicted direction is not justifiable reason to open a trade. Trader also should have an idea how much money he/she is willing to loose if trade turns to be enemy.
In mere experience, some setups were showing on chart as very attractive but after entry there was no place to logically place stop-loss. In such cases, the thrill of going for trades can hide the risk.
In an ek structured setup, the invalidation level can be identified before entry itself. If the price reaches that level, he/she might have to take another look at the original idea of trade. It can help the trader to avoid falling into the habit of holding a trade against the market.
Position size also important hai. Same setup mein bada lot use karne se potential loss bahut zyada badh sakta hai.
A good setup and a big position are two different things. Despite a good setup, taking too much risk can harm the account.
Therefore, not only the quality of the set up but also risk management should be part of the trading plan.
Anothere learning brings out is that too much waiting for confirmation could prevent many unnecessary trades to take place. Sometimes amateurs try to guess the market movement. But prediction and confirmation are different things.
What if price reaches a significant resistance. Trader can assume that the price will now reverse and trader can immediately open a sell position but price can also have a breakout above the resistance. If the strategy confirms the trader can take decision based on the price movement observation.
In Mere experience waiting had often saved me from trades which appeared good at first. Some missed opportunities, but not every missed trade is a loss. Keeping your capital safe is also a result.
Trade journal ek way hai iss process ko improve karne ke liye. Har trade ke saath aap entry ki reason, market condition, risk, result aur apne aap ko kesa mehsoos kar rahe the usko note down kar sakte hain. 1-2 weeks ya months ke baad apne repeated mistakes ko spot karna aasan ho jaata hai.
The best setup is not the one that looks most exciting on the chart but the one that matches the rules of the tested strategy.
Getting out of the habit of trading that candle can be a significant step in developing trading discipline. There are almost always opportunities in the market but not all movements setup to be traded.
A simple checklist has been found useful in the ‘Mere experience’: What is the context of this market, does the setup match with my strategy, is the entry logically determined or not, where is the invalidation level, and can this trade afford the possible risk to the account. If any one or more of these conditions is lacking, trade can be skipped.
The advantage of this approach is that the trading decisions are based not on one‘s emotions, but on a set of predefined rules. This approach is also expected to help identify psychological triggers such as FOMO, boredom and revenge trading.
Another important point is to remember is that best setup does not mean a guaranteed winning trade. Ever a perfect setup and plan can fail because financial Markets can be unpredictable as we all know. That is why position sizing and risk limits will always go hand-in-hand with any setup selection.
Success in trading is not measured in terms of number of trades you take. When to get into a trade, and when to look at a chart without a position, are both equally crucial skill.
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