Here are the various elements and part of your trading strategy you can tweak in order to make more money trading the financial markets:
1. Increase Leverage and Risk Per Trade
If you have a system that has extremely high win rates and has a respectable reward risk ratio, then trading such a system with higher leverage and risk per trade can increase trading profits. For example if a trader has a system that has an 85% win rate with a 3:1 reward risk ratio. The trader position sizes for 2% risk per trade.
Such a trader has a great system. With 85% win rate and a respectable 3:1 reward risk ratio they can afford to risk more per trade. They can afford to lever up. Heck on such a system I would risk 10% per trade or more, since the risk of consecutive trading losses is very small and when you win, you win three times what you risked.
The only exception to this would be, if the increase in risk per trade causes you to feel uncomfortable and thus you start to deviate from your system and it harms it’s performance. Then that can actually be detrimental to your system.
If you have such a good system, then it kind of deserves to be traded with a lot of leverage. If you are really scared of it, then what you can do is open up a side account with a smaller amount of money and trade the exact same system in both accounts. Your main account with most of the money is the lower risk per trade, while the side account has the higher risk per trade. That can make you feel more comfortable.
Not every system can increase risk per trade. If you have a low win rate system, then by definition you need to trade with low risk per trade because of the much higher chance of having consecutive losers.
2. Increase Win Rate
If you can preserve your current reward risk ratio while increasing your win rate on your trading system, then that leads to increased profits. Find trades that have the market environment and order flow generators so you can have higher win rates than other traders. Time your entries better so you can get in at a better price.
Just bumping up your win rate by 5-10% can do wonders for your bottom line.
3. Increase Frequency Of Trades
Lets say someone has a trading system that normally fires off 30 trades per year. The system is profitable, even very profitable at the end of the series of thirty trades. If the trader can find a way to generate those same signals, just in greater frequency then they can make more money. If you can keep the same system, but up the amount of trades the system fires off in a year to 60, then by definition you will make more money because your edge is being exploited over a larger series of trades and you can compound faster.
4. Increase Reward Risk Ratio
If you can maintain your win rate, but increase reward risk ratio, then you will make more money because your winners are bigger. You let your profits run and catch the bigger trades.
If a trader has 50% win rate with a 3:1 reward risk ratio. If they can keep the 50% win rate, but increase reward risk ratio to 5:1, then the trader will make more money.
5. Stay Out of Bad Trades
This is similar to increasing win rate. Everyone has had bad trades that they may have thrown on when they deviated from their system. Perhaps they threw on a revenge trade, or they saw a setup that was almost close to their system rules, but not close enough and they took it anyways and it winded up being a loss. Or perhaps they threw on a trade in the late Friday afternoon session only to find out that the market stopped them out quickly.
Get rid of these horrible trades to keep more money in your pocket as well as increase your confidence.
6. Pyramid On The Huge Trades
This is similar to increasing reward risk ratio.
Everyone has had certain trades where they may have profited 200 pips, but the market continued on for another 1,000 pip run. If you could of identified the potential for a sustained move, then you could of not only stayed in your initial position, but you could of pyramided into the position further adding to your position size as the market moves in your favor at key levels. After all if the market is going to make a huge move and you feel it is going to happen, why not add a little bit more position size to go for the jugular to juice returns?
7. Only Trade Explosions of Volatility
Pretty simple concept here. Avoid choppy markets and only trade when you know a big move is occurring.
I know of some traders that make a killing trading the big moves and breakouts, but give back all their profits when the market begins to range and get choppy. If only they took their profits, went on vacation for a few weeks while the market consolidated, then came back, they would of kept their money and came back in time for the next breakout.
8. Exploit Edge In A Different Market
If you have a certain edge and exploiting a certain inefficiency in the forex markets, then why not exploit the edge in another market as well? Why not attempt to trade stock, futures, commodities, bonds, etc?
9. Exploit An Edge On A Different Time Frame
If you are exploiting an intraday edge and taking advantage of changes in fundamental value or sentiment, or stops being tripped, then why not attempt to figure out if those exact situations happen, just on a bigger time frame, say weekly? Doing so helps to capture the bigger moves.
10. Find New Inefficiencies
If your current inefficiencies and trading strategy is capturing a certain amount of trading profits and return, then why not attempt to research and discover other strategies and inefficiencies that you can use either in the same markets as your current strategy, or a totally different market. That way you can have two different systems exploiting two different edges and inefficiencies.
Hope it stimulated some thought.
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