Profitable ETF Trading Strategies: measuring your open risk in minutes per trade
The shorter the time frame of your typical trade, the more important that the refinement of your entry becomes. In fact, the more important that the refinement of each segment of trade management becomes, because there is less time available to correct for errors or to overcome sloppiness in execution.
For short-term trading, such as intraday or swing trading, it would be a reasonable objective to improve the timing of your entries with swings in the marketplace that are favorable to you once you enter the position. If you are doing this on a regular basis, you will do a lot to reduce the intraday stress you feel with the normal process of trading.
Conversely, if you are out of tune with the normal cycling of the market at your moment of entry, you’ll experience the phenomenon of trades moving against you right after you enter on a regular basis. You will know if this is happening to you if you have a depressing psychological mind state at the start of each trade which actually expects it to start poorly for you.
A normal way for you to get a bad start is to be waiting too long for confirmation of your move before you enter. You think that by waiting a few extra minutes or an hour and seeing price moving in the direction you anticipate that you are improving your success odds in the trade. In fact, the false comfort of increased confidence is actually costing you time and money.
The price of certainty is underperformance in trading.
By learning how to act sooner and with more uncertainty in the pattern, you may discover that you increase your percentage of success, the average return per trade, and reduce the amount of time until the trade is favorable.
A good way to monitor your entry timing is to measure in minutes the amount of open risk in your trading. The sooner you can move the trade to break even, the more in tune with the follow-through action you are.
For intraday traders would like to see that measure in single-digit minutes. In order to achieve this objective, however, you must have relatively tight stops and be closer to intraday charting points in order to quickly get to “no lose”.
By paying attention to detail at the entry, refining your timing, and being in tune with market cycles you can reduce stress, improve your winning percentage and add directly to your bottom line.
Dial in and stay focused, traders!