High Probability Trading Strategies

Unsuccessful traders are usually lazy. That’s why there are not successful. They don’t take the time to break down each aspect of trading and discover what works and doesn’t work and how and why it works. To be successful or take your successful trading to a more profitable level, you must take the time to thoroughly understand each aspect of trading, from entry to exit. Here are some steps to consider to help you master each aspect of your trading plan.

1. Focus on just one simple aspect of trading at a time.

It is easy to get bogged down in all the possible information available to make a trading decision. To master trading, you must master each simple aspect. Don’t make it complicated. Focus on just one simple aspect at a time to learn why and how it can be useful to make specific trade decisions. For instance, I teach the Dual Time Frame Momentum strategy in High Probability Trading Strategies as an important filter to identify potential trades. It is a very powerful technique. It is only used as a filter for potential trades, not a stand alone trade strategy. It is just one simple aspect of a trading plan. If mastered, it could dramatically improve trading results.

2. Why is the particular trade strategy useful?

Every aspect of a trade strategy and trade plan should make logical sense. You should never blindly make decisions without clearly understanding how and why the information you use will be productive. In the case of DTFM strategy, do you clearly understand why it identifies a potential high probability trade setup? The logic is – if two time frames of momentum are in the same direction, the odds are the market will move in that direction and if it does not, the DTFM setup allows a very close stop. However, this strategy will only be useful is the indicator reliably makes reversals most of the time at or near price reversals. Ask yourself this question for every aspect of your trade plan whether a setup condition, objective entry strategy, stop adjustment or exit strategy and more. Why is it useful?

3. How is it useful?

In other words, how do you make a specific decision based on the information? It drives me up a wall when I read in books or hear in trading course things like – “You could buy around here and place your stop around here —–.” When I hear these vague and generalized so-called trading strategies, I know the “teacher/trader” has probably never actually traded successfully. With trading, just like every other business, you have to make specific decisions based on the information available. How exactly do you use the information to make a specific decision? The decision should be a logical consequence of the nature of the information.

4. Make it a part of your trading plan.

Once you have done your homework and found a specific strategy that will provide you with information to make a specific trade decision, make it a part of your trading plan. The correct conditions for this aspect of your trading plan should be in place every time you consider a trade. In the case of the DTFM strategy, you only trade in the direction of the longer time frame momentum and only consider a trade entry following a reversal of the shorter time frame momentum. It is a simple, logical and very effective filter to identify high probability trade conditions with very small capital exposure. It is not a complete trade plan, but one important aspect that you can master for any market and any time frame.

Every trader should improve their trading if they take the time to completely master each aspect of their trade strategies and trade plan. You may already have made a specific strategy part of your trade plan. But, have you taken the time to thoroughly understand how and why it is useful and under what specific conditions it should be implemented? If you break down how you make a trade decision and manage a trade into each of its individual aspects and master those strategies, I’m sure you will dramatically improve your trading.