4 Strong Reasons For Having Trading Rules

Posted in: Trading Article

Know Your entries exits and stops

Sometimes trading is tough. When markets are moving quickly, they can put your head in a spin and when you factor in the strong emotions that are likely to show up at these times, it’s no wonder that traders often end up tying themselves in knots. So employing a trading strategy that leaves no room for ambiguity is hugely advantageous.

If there’s an entry, you can take it (or not). You know where you’re exits are and you know where you’ll take a loss (whether or not you’re ‘wrong’). Although there will be times when you can sense that a trade isn’t absolutely perfect, there are some strong arguments for mechanically defining your ETS (entries, targets, stops).  Here are 4 of them-

 

1. CLARITY Of Trading Opportunities

Knowing exactly what a trade looks like and where your ETS are is a huge advantage. Trying to figure out these details as markets are moving and often with very little time to act, is possible but at the same time it can also be tricky. If you have a concrete way of identifying these key prices, you can focus your attention on figuring out what the market is actually trying to do and decide on whether or not you take an entry. By removing a decision step each time you trade, the confusion lifts and a clearer picture of the market can emerge.

2. REPLICATION OF SUCCESSFUL ACTIONS

By knowing what your ETS are before taking your trades, you’re able to improve your ability to replicate performance over time. Although conditions are not always going to be the same, having an execution system gives you solace when your exit price gets missed by a few prices or even if it runs straight through your targets. Without a system you can always blame yourself for making the wrong call. With a system, you know that these things can always happen but it’s okay nevertheless.

3. Trading PERFORMANCE IMPROVEMENTS

Without knowing what you’re trying to achieve, trades can become a little bit random. So even if you are keeping a good trading journal, it’s hard to figure out what and why something is or isn’t working. Knowing exactly the types of trades that you take gives you a far better chance of identifying key performance details and incrementally improve your trading results. Not only that, but if you are manually trading you can very clearly define what a trading error looks like – and remember, trading errors account for a large part of why traders are unable to maintain consistent profitability.

4. Trading System Automation

Some people love automation and some people hate it. But if you’re able to mechanically define a trade and add conditions to taking a trade, it becomes possible to automate a strategy if you choose. Although there are weaknesses to automation, it can make up for them by trading a robust system in multiple markets. Plus the fact that even if you want to trade manually, automation allows for trading rules and inputs to be back-tested far more efficiently.

 

Netpicks Trading Systems Fit The Bill

There is a reason why our trading systems are not only profitable but popular and that is because the previous four variables are wrapped into each system.

Take our Counter Punch Trader system as an example:  

counter punch trader
COUNTER PUNCH TRADER – ONE OF OUR MOST PROFITABLE TRADING SYSTEMS EVER!

When you are looking for clarity in terms of a trade opportunity, nothing is more clear than having the setup plotted right on the chart (A).  What’s behind the setup is explained in the training but you can see how clear the entries are for the trade.  The only decision you have to make is whether or not you want to put your entries above or below any key areas that may cause price to stall.

You want to replicate your trading decisions and at the spots marked “B“, it shows how easy it is to replicate the important parts of your trading; entries, exits and stops.

Counter Punch Trader also has add-on trades (plus trailing stops) clearly marked on the chart and knowing these will allow you to journal these trades (and stop management) to see if they are adding or subtracting from your equity curve.

Automation can also be done through the “Trade Assist” feature.  At C, all the vital information for the trade is plotted in the information window (not a black box trading system) which will allow you to automate aspects of the trading plan.  Removing human input and error from trading is often a positive step.

Defining many aspects of your trading is not a difficult process although it can be, at times, difficult to follow the rules.  But following the trading rules of your positive expectancy system is something that must be done.  To fail at that, you are surely guaranteed to fail at trading.


Since many traders like to use indicators (usually the wrong way) for their trading method, Netpicks has put together a free and vital “Indicator Blueprint” to put you on the right track when using an indicator for your trading decision.
Get access to the PDF and videos by clicking here.

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Coach James

James began his trading career nearly a decade ago, learning his craft in fixed income derivatives. These days, he predominantly day trades index futures using auction context as the vital ingredient to his approach. James is a firm believer in the importance of trader psychology and how it can make such a monumental difference to how well a trader performs.

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