Qualifying Your Trades to Win in 2009

Would you like each and every trade to be a guaranteed success? While realistically that isn’t any more possible then it is for a baseball team to never lose a game, it is possible to dramatically improve your trading to a point where you almost feel it is a guaranteed success. After all, each year there is a world champion baseball team.

If you use a technical approach to your trading then odds are you have found a technique or method that offers some apparent rate of success. Unfortunately, often an approach that may appear to be sound will fail when an actual trade is implemented and never reach expectations. The problem is often not the method, but the choice of when to use it. Two scenarios may appear similar, but with one the method will generate a profit while the other will lose money. Is there a way to boost the success rate in actual trading when you implement a specific technique or method? The answer is yes!

If you were shown examples of successful trades using a particular method or technique and after review the method made sense to you and if it appears to work for others, then it is logical to expect it will work for you. Unless you have been duped by an unscrupulous company, odds are that if frequent failures occur then something else is at fault and it may not necessarily be you.

The reality is that most writers of courses and books on trading have the very best of intentions when they share their own particular method or technique, but unfortunately fail on conveyance. If this is true in your case then it is obviously not your fault, but isn’t necessarily the fault of the teacher either. It may simply be due to a natural human fallacy that gets in the way.

When a person has enough experience in trading to develop their own approach the experience itself often plays a key role in its success and that fact usually goes completely unnoticed if this experienced trader should author a book or course about the successful method. The result is that they never fully convey all aspects necessary to insure success. How is this possible?

An experience trader will often subconsciously recognize which trade set-ups are most promising and which are not, thereby automatically choosing the better ones. It isn’t that they are intentionally holding back anything important, but rather they just don’t recognize themselves what it is that is actually helping them to make this better choice; the experience itself. Experience often assists us in ways that are subconscious and automatic. This is true when driving an automobile. Most of us give little thought about how much pressure to apply to an accelerator pedal or brake pedal, we just do it automatically based on what we need.

Additionally, experience teaches what cannot be learned in any book or manual and much of it is impossible to pass on directly because the teacher himself probably is not able to fully define it. He simply knows that if he uses a particular set-up it results in a good trade opportunity. It my not register, for example, that he also subconsciously takes note of the volume of trades, which in turn influences his choice of which set-up to favor and actually take.

So someone may teach you a technique or method that actually works, but it doesn’t for you because there is a missing piece of the puzzle. This missing piece more often than not is a qualifying factor. So what if you have a great technique or method that you are having difficulty with? Before you give it up as useless take another look using a qualifying factor. While you may not know which qualifying factors are used by the originator of a method or technique, you don’t have to. You simply need to use any dependable qualifying factor that will boost the positive results of the trading method or technique you are using. If it enhances the method then it can make a substantial difference in the end result.

A qualifying factor or qualifying method is quite different than an actual trading method itself. Qualifying factors will not provide buy or sell signals, they simply create a filter for another method. This filter is designed to reduce the scenarios where a particular set up is more likely to fail. There are many qualifying methods available so we will focus on just one as an example; using multiple time frames.

Multiple time frames is the practice of using a multiple view of market activity at different levels, typically different time frames such as using both a weekly and daily chart. The objective is to trade in line with the stronger and more powerful trends. In the two time frames mentioned, a weekly and daily view, the weekly chart would be used to established the overall strongest direction of the market. If the indication based on the weekly view is that the market is most strongest to the upside or appears to be trending higher then the chosen trading method, which would be used on daily time frame, would only be taken if it signaled a buy. No sell signal would be taken because this would be against the weekly trend. So in this scenario you would buy and then exit, but never place a sell to actually enter the market.

The reasoning behind this is that a market is statistically more likely to continue in the direction of an established trend then it is to go against it. Eventually, of course, it does change direction since all markets will from time to time, but these events are typically much fewer and far between. Therefore, taking trades in line with the trend of a higher time frame dramatically increases the odds of success. This will naturally reduce the amount of available trades based on a particular method or technique, but the quality of trades will be much better.

This technique can be expanded by taking note of the established highs and lows on the higher time frame that might act as support and resistance. These levels can be important indicators of where a market is likely to react, which may support or hinder your chosen method or technique.

The beauty of using this technique is its simplicity. No matter what time frame you are looking at, all you have to do is look to a higher time frame and view which way the market is trending. In many cases it is just that simple.

While there is much that can be said for using this technique of multiple time frames and there are of course other methods of filtering as well, using them can change the playing field even if you are not a well experienced trader. By utilizing qualifying method you will find that your trading not only dramatically improves, but is less stressful as well. You are likely to find yourself hitting one home run after another, a champion trader that views success as the expectation and not just a hope.

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