Best trading tips will help you combine your strategy with your trading symbol. Some steps of this algorithm can also benefit investment strategies.
The first of the trading tips
Keep your strategy as simple as possible.
More details
A system must include a minimum number of parameters, regardless of whether it is a speculative or investment strategy. Your strategy should be as simple as a hammer. Using 10 indicators and a complex algorithm to harmonize them is not necessary.
Explanation
To begin with, several indicators or parameters constantly produce multidirectional signals, making decisions impossible.
Everything is simple if you focus on a couple of parameters. Buy when both are looking up and sell when both are looking down. If you have 10 indicators, they all point in different directions at different times with different lags. It’s just a mess. Even a computer with artificial intelligence cannot sort it out.
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Secondly, a complex system reacts very sensitively to all market changes, thus quickly becoming useless. By complicating your strategy, you reduce its lifespan. The simpler the system, the longer it will be able to generate profits, and the less painfully it will survive a bad market.
In short, you have three options:
- You enter and exit the market using a simple system. If the system is profitable, you are great. Your account will increase.
- You apply a complex strategy in the market. Not good. Even if the system is good, it will not last long.
- You make transactions in the market without any system. In this case, your account is doomed.
Example
Many people write about the deplorable state of Chinese stocks and the real estate market. The fact is that over the past 5 years, the Hang Seng index has fallen by half, including by a third over the last year.
They write about the Chinese authorities who are considering creating a stabilization fund of 2 trillion yuan ($278 billion) to support Chinese shares.
It is also about the liquidation of China Evergrande Group, setting off a daunting process to carve up one of the biggest casualties of a property crisis.
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Meanwhile, I remember very well the times when world markets closely monitored the state of the Chinese economy on a daily basis. In those days, the stock markets of Western countries fell at the slightest bad news about China.
There is no trace of this correlation now. Look at the DJIA, NASDAQ Composite, S&P 500 indices, and the indices of European countries. Many of them are at their maximum!
Now imagine that your strategy takes many things into account, including China. This system would have stopped working long ago, even if it was good before.
Of course, this is a very large-scale example. However, this emphasizes that simplicity gives the system reliability and durability.
The second of the trading tips
Choose a method to control risk.
More details
There are two ways to reduce the risk of your trading strategy. Investors avoid a lot of risk by diversifying their investments. Speculators do the same thing by setting Stop Losses. There is no third way.
Briefly, the scheme is:
- A market participant who applies diversification is an investor.
- Anyone who trades with a Stop Loss is a speculator.
- If you do not use one of them, you bring money to the market to give it to someone from the first or second group who read this best trading tips ever.
The third of the trading tips
Choose a timeframe.
More details
If you are an investor, you will use daily bars and look at weekly ones. This is correct in general. But for speculation, everything will be more enjoyable.
Explanation
Stop Loss size is the most essential thing that is determined by the timeframe. Because this size always depends on the current volatility, that is, price fluctuations. After all, the price does not move straight. It meanders and tries to deceive you. For example, you can use a 0.3% Stop Loss for 5 or 15-minute bars. Of course, this is not suitable for the daily timeframe.
Example
The Stop Loss size for today’s Bitcoin price should be at least $2000 for trading daily timeframe. This is more than four percent of current prices. If the size is smaller, you will constantly knocked out and end up with a long string of losing trades. It is clear without trading tips that a value of 4% is not even close to suitable for intraday trading.
In turn, the size of the Stop Loss directly affects the number of open positions. Also, the type of the funds curve in your trading account, that is, Equity, greatly depends on this amount. Many bad trades in a row look very ugly on the chart and are challenging to bear psychologically. In addition, the total amount of all commissions you must pay also depends significantly on the number of transactions.
Now, you can see how important something as simple as choosing a timeframe for your trading strategy is. Choose wisely! I hope my trading tips help you build a successful trading strategy.
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