There are multiple ways to trade the markets successfully. No two individual traders will trade exactly the same. If you give two people the same strategy, they will interpret it in different ways and trade the strategy differently. However, both can still be successful.
Today we are going to explore a way of trading that is not common in the retail trading space. What we are going to explore is automated trading. Most people think that this style of trading is only for hedge funds and institutional investors. This is not true. Automated trading has become increasingly more available to the everyday retail trader. The trading principles applied with automated trading can be very useful to anyone, no matter what type of strategy and method of trading you are using.
The first and perhaps most important thing that automated trading can help you with is learning the art of patience and discipline. You have heard it time and time again that patience is the key to successful trading. Waiting for those “A” grade setups to solidify your trading success.
What I have learned is that it can be difficult to develop the habit of patience while trying to trade a purely discretionary trading system. You are so exited about trading and being in the market that you want to jump in at every opportunity. This is detrimental to your trading success. What you want to do is develop the habit of taking trading opportunities that strictly match your trading criteria.
So what better way to do this then by having it done for you? When the computer executes your trades you are free to go about your day and not worry about your positions. If you have predefined all aspects of your trading system then what is there to worry about? You know your maximum loss, profit targets and how your trade will be managed.
Strict rules based trading forces you to only take trades that match your trading criteria. This is very important as this simple action allows your edge to play out.
When a trade is not inline with your strategy, it is not executed and you do not have the temptation to take trades that do not alight with your trading plan.
This brings me to my next point, which is sticking to your rules with military grade precision. To ensure we are taking proper trades we need a set of rules. Your rules should be in the form of “IF” “THEN” statements. What I mean here is that “IF” X happens, “THEN” B happens, you execute some sort of action. Stacking your trading rules into if then statements will help you to execute your trades like a robot. When we trade in this way, we are less affected by emotions.
So what exactly is an IF THEN statement and how do you go about building your trading plan around them? Well… it starts with being very specific. You want to be as specific as your can when defining your trading rules. For example, if you are trading a support and resistance based system, you must define EXACTLY what support and resistance means to you. That way when you see it on the chart you do not have to hesitate to add your support and resistance level. So for you… does support and resistance mean a point where price as touched 3 or more times? If yes, here is an example of a rule you could put into your trading plan that refers to support and resistance.
“I only consider support and resistance levels with 3 touches or more”
A simple statement such as this is what will keep you objective and out of trades that you should not be in.
The next component of the IF THEN statement is.. you guessed it.. the THEN. So now that we have our first rule defined, which states you will only take trades with support and resistance of 3 touches or more… then what? Well, in our plan we would want to specify the action that would follow the IF statement. So IF this happens, THEN I will take the following action.
For example, if there is support and resistance as defined in my trading plan, then I will look for a price action candle signal that is rejecting the level. To break this down into another IF THEN statement we will then say IF we have support or resistance, THEN we have a price action signal candle, I will set a pending order. In this example you have your IF statement referring to support and resistance, then you look for the signal and take the action step.
Of course this is a very simple example but this is the mental framework you need to base your trading on. It will keep your mind thinking systematically and when we follow a system perfectly is when we get results in trading. As traders we must allow our edge to develop with no emotional intervention. This is the main point that automated trading can teach you!
Trading with robots will allow you to develop a systematic mindset quicker. Take the steps necessary today to ensure your long term success in the markets. By signing up for your free trial at Evestin Forex you will get access to our amazing portfolio of robots. Not only will you get to trade these robots but you will also develop the mindset of a professional trader along the way. Click HERE to start your free 30 day trial!