We can only improve so much by looking at other people’s trades. The “level-up” is when we find ways to improve our own trades…the trades we end up taking most often.
This is the gritty work that most people don’t want to do. But if you want to improve, here’s how to do it.
How to Improve Your Trade Entries
Each trade we take has several major components:
In this article, I’ll go over ways to improve your entries…but I will also touch on ways to improve stop losses and profit targets.
This process is about looking at how you trade, so you can tweak your method to compensate for your weaknesses and maximize on your strengths. This is beneficial, even if you are using someone’s strategy because it is difficult to trade exactly like someone else.
Look at your last 20-50 trade entries.
How was your timing, overall? Likely some trades will be ok, some will be bad, and on some trades your timing will be good.
You’re looking for tendencies…what happens MOST often.
Did the market chop around for a while before moving in your direction?
Did winning trades take off quickly while your losing trades sat there or moved toward your stop loss right away?
Did you get in as a move was ending instead of starting?
What about overall market conditions? Should you even be trading at all?
You can use this information to improve your trading going forward.
Improving on Entering Too Late
If you’re often too late, admit there isn’t enough profit potential after a typical entry to warrant the risk. You’re getting near the end of a move instead of closer to the start or middle where there is more profit potential.
Look where the move started. Where there signals to get in there? What were they?
What information or rules could have prevented you from entering so late so often?
Improving on Entering Too Early
If you’re often in too early, sometimes the fix can be as simple as waiting for an extra price bar or two.
Or waiting for the price to start moving in your direction before entering.
If you tend to enter early, get stopped out, and then the price goes in your favor again, you have a couple of options:
1) Exit very quickly if the price doesn’t run relatively quickly. Re-enter if it triggers an entry again. No point taking a full loss when you know that you often get stopped before the run.
2) Await more confirmation. This often means getting in slightly later but may avoid one or two stop outs in 10 or 15 trades. Avoiding a few losses means more money in your pocket at the end of the month.
Improving on Entries by Monitoring Trading Conditions
You may notice that you are entering trades in poor market conditions for your strategy.
How do you know? Most of your trades go nowhere after entry. The price whips around (or moves slowly) going up a little and down a little. The price isn’t moving enough to reach your target before reversing. While this may be a target issue, if your profit targets are pretty conservative, and trades still can’t be reached, that may be a signal that conditions aren’t great.
Note that. Look at all the trades you took in those conditions.
How can you determine those conditions? What signs is the market giving you?
What changes when conditions become more favorable?
Since conditions are always changing, you may still take a loss or two until you realize conditions have changed. Then you back off, saving yourself from further losses.
When conditions turn favorable again, you may miss a trade or two, but you can capitalize on the bulk of the time conditions are good before changing again.
How will you determine this? What are your rules for the conditions you will trade in, and what conditions you won’t? How could you determine that? Look at your trades and price action around the trades for answers.
Improve Trade Entries – Tabulate Results and Refine
The work is not done when you come up with an idea. The work is just getting started.
If you find a possible improvement, tabulate what your profits and losses would be on your last 20-50 trades using that new rule.
Do results improve?
Keep testing new ideas in this manner until you find a method that improves results across a large number of trades.
This is why this work is tedious and most don’t do it.
You’re looking to improve your results by maybe 1 or 2R every 10 or 15 trades.
It could be a bigger improvement, but any improvement is a step in the right direction.
And remember these components all work together.
Your Entries Affect Your Stop Loss
You may see your winners often take off quickly while your losses fail pretty quickly.
In that case, you can change your stop loss rules to cut losses quicker if the price doesn’t run quickly, reducing the average loss.
For example, if your average loss is 1R, and you find that you can cut some losses quicker by analyzing your entries, you may be able to reduce your average loss to 0.8R.
Over 10 losses, you just saved an extra 2R.
Your Entries Affect Your Profits
By improving your entries, you may be able to increase your profit target on a reward:risk basis.
Assume your average win is 2R.
By improving the entry, you may be able to go to 2.2R, 2.5R, or even 3R.
Even if you can squeeze a little more out of your profits, like 2.2R instead of 2R (because of better entries), on every 10 winning trades you just found an extra 2R.
If your better entries allow you to get to 3R average profit on winning trades, you just found an extra 10R every 10 winning trades.
Don’t Seek Perfection, Just Tiny Improvements With Each Adjustment
The “perfect entry” isn’t required. Just improvement.
If better entries save you from a full loss one to two times in 10 trades, your results improve.
If you can squeeze a bit more profit, on average, out of your winners because of better entries, your results improve.
Keep going through this refining process until you get the results you want. Notice this process has nothing to do with what other people are doing. It is about improving on what you are actually doing.
Do the work no one else wants to, and get the results they always wanted.
By Cory Mitchell, CMT
If you want more insights on trading, there are loads of free resources on the site. If you want to see how I trade, see my courses in the Shop. I have courses on day trading, swing trading, investing, stocks, and forex.