3 Basic Trading Principles To Improve Your Results
1. Always have your key support/resistance lines drawn in that are most relevant to current price levels. Draw in at least 2 key lines. 3-4 lines is recommended!
2. Only trade off key support/resistance lines and wait until the market is visibly decelerating into the key line. Understand that trading off these key support/resistance lines will deliver the highest probability technical entries. If you can develop the patience to wait until price is bouncing off these key levels, your strike rate will increase. Understand, however, that even the best technical set ups are not perfect… and A+ setups still lose money from time to time. In the image above, our losing positions are indicated by red arrows, and the winning positions indicated by GREEN arrows.
Trading off key S/R levels, combined with a smart exit strategy before the next key level will push your strike rate into the favorable side of 50%. Depending upon your degree of patience, management, entry filters etc, you may even approach a strike rate more like 60-70%.
3. Never trade into key support/resistance. Stretch your reward/risk as wide as possible before reaching the next key line. By identifying at least 2 key S/R levels, you’re able to employ a smart exit strategy and allows you to capitalize on the market bouncing between these levels. In FX trading, the ability to skew your reward/risk allows you to make 2, 3 or 4+ times what you risk. By this trade management principle alone, it allows you to be wrong more times than not, and still make money long term.
Remember the profitability models we teach in Lesson 6 of the Infinite Prosperity course:
- A high strike rate strategy (HSR) makes money from being “right” more times than being “wrong”.
- A high reward/risk strategy (HRR) makes money by making more on winners than it loses on losses.
When you can combine the two, and trade a high strike rate, with a favorable reward/risk… then you’re really cooking with gas!
Exploiting these 3 technical principles of support and resistance will help accelerate your journey into successful trading.
In summary:
- Always have your key S/R lines drawn in
- Only trade off a key S/R line
- Never trade into a key S/R line
Have a great week!
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