Having a Precise Trading Strategy
In my opinion, one of the common reason for confusion and uncertainty among aspiring traders is the lack of precision when it comes to the definition of a trading strategy.
After discussing with several traders and asking them what they were trading, I came to realize that most new and struggling Forex traders have a strategy that they will be able to rely on only 30% of the time (rough estimate).
The main reason for that is that the market never acts like what you see in trading courses and lessons. Coaches will often train traders to recognize setups and will use the perfect example on a training document. However, once the trader gets on the real market, he'll be asked to distinguish a good from a bad setup.
The only way to do this is to have a trading strategy with detailed criteria for a setup, or as I call it, a precise trading strategy.
The problem now comes in defining what precision really is. I describe a precise trading strategy as a strategy in which rules exist to define what is a correct setup. For instance, one of my rule is “The closing price must be at a maximum 10 pips from the high to form an Engulfing candle”. That might not apply for you and your rules might be different but the important is to have them.
I agree, defining your rules takes time because you'll constantly see new candles at first. You'll ask yourself whether what you see is a valid entry setup. That is normal. However with time you'll start to define your rules and get clear on what you're looking for.
Some people in life hate having precise rules and guidelines to follow. However, as an aspiring trader, it is essential for you to create rules in your trading at first. That is an important step toward the Ultimate Trading Plan.
Do you have a precise trading strategy? Or are you looking for too much flexibility? Let me know and I'll do my best to help!