BTW, the title of this post sounds better if you say with a Shakespearean British accent in your head. 😉
If you want to be a profitable trader, you must follow FOUR simple rules:
- Trend Trade
- Cut losses Short
- Let Profits Run
- Manage Risk
That’s it! If you can follow those FOUR rules, it’s almost impossible to lose money trading.
So, why do most traders lose money with their trading?
I could write a book on that question alone… but after all these years working with traders, I have some answers.
Most traders complicate trading because they are perfectionists. They want everything to be PERFECT before they pull the trigger. In reality, most profitable traders only look for Trend Trade setups.
While almost everyone pays lip service to the above FOUR rules, almost no one implements them correctly in their trading.
Ask any professional trader (by professional I mean someone who is profitable)… if it is better to trade WITH the trend or AGAINST it.
I’ll be willing to bet All of these professionals will tell you the same answer: Trade with the Trend!
So, let’s make this Cardinal Rule #1: Trade with the Trend
If you look at your Trend Trade system, and you can’t tell if you are in an uptrend or downtrend in 30 seconds or less, then you are in trouble!
Set up your charts to show you EXACTLY if the market is moving UP or DOWN!
Think about it – Trading is a river in which water flows toward the path of least resistance. When you go with the flow, you remove resistance.
Money also flows, when it moves up and down each day, the market moves it in the direction of LEAST RESISTANCE, this is how trends work.
How can you possibly expect to make profits if you are fighting upstream against the current? Well, this is exactly what most people do when they place a trade against the market!
A perfect example is a trader who uses overbought/oversold oscillators. The trader might have an oversold oscillator with divergence, and it looks PERFECT, but the trend might still be going DOWN.
He buys at the market, and it starts to move his way – then it reverses into a loss. The trader says: “WHAT THE HECK HAPPENED, IT LOOKED PERFECT.”
I’ll tell you what happened… He was fighting the Trend (going against the trend or flow of the market) and was stopped out of his position.
I see this happen every day… ALL DAY!
To not Trend Trade is like driving a car and NOT looking at ANY of the stop lights. Eventually, you are going to crash the car, and for the trader, that means losing money.
STOP – LOOK – And LISTEN to what the market is telling you.