Many traders, after being in the market for quite some time, have no problem analysing charts, and they can identify the best trades very easily. However, there is a lot of difference between being able to identify good trades, and being able to take the action on them. In today’s article, we are going to discuss how to take the best trades, and why generally traders don’t take them.
Before going deep into this topic, it is important to understand what causes the best technical analysts who have mastery in chart reading to have such difficulty deciding whether I should enter in this trade or not?
Generally, traders fail to enter good trades because they simply don’t have confidence in their trading systems or abilities. Especially new traders often think that trading is much more difficult than it actually is. So, whenever they find a good trade, they think that if trading would have been that much easier, then everyone in this world would have made tons of money. Here, they need to understand one important thing; Mastering your technical analysis skills is much easier than developing the right trading psychology, and trading is 80% psychology and 20% technical skills. That is why most people fail in trading.
One more common reason because of which many traders fail to take the best trades is that, when they trade in real markets, emotions get involved in this game. That is why they probably don’t take good trades because of the fear of losing money.
Paper trading can test your strategy, but when you trade in the live market, money is on the line, and that is why you tend to overthink. In live markets, you know that there is the possibility of losing money, wherein in a demo account, you trade calmly and take the best trades because there is no real money on the line. That is why preserving your capital and cutting your risk of ruin to zero is far more important than making money through trading, if you really want to remove emotions from trading.
One more scenario that often occurs with many traders is that when they find a good trade but didn’t take it, and then another similar trade comes, this time they will enter in the trade, and unfortunately, this trade will be the 1 of 10 cases wherein they will get a stop- loss. Because of this incident, their confidence gets a hit, and the next time they find a trade, they doubt their trading system, and the cycle repeats. This is something that frustrates them the most, and sometimes it causes massive drawdowns to their account.
Up to this, we have understood what causes us not to take the best trades and now, I will give you some solutions to overcome this problem.
For taking the best trades without fear, you should know your trading edge. You must have a brief idea about which things will work for you and which won’t under all situations. Many times, your strategy or trading approach requires slight change because of the constantly changing market cycle. Once you know which things or which pattern or which strategy works for you under particular circumstances, then you will not hesitate at all from taking high conviction trades.
Now the question arises, how can I know which things will work for me? In order to get the answer to this question, you have to back-test your strategy so that you can understand all the moving parts of your trading system. Once you are comfortable with your system, then start taking the trades on which you are highly confident with risk management, this will test your psychology. Here, how confident you are on a particular trade may vary depending upon many variables.
This doesn’t mean that you should take every trade you see. You should always filter your trades, but don’t over analyse them because that will lead to overthinking. Here, your motive should be to be confident about your trading edge and not to be afraid of entering the trade when you see the opportunity. This is how you can back-test your system and take the best trades.
After doing everything correctly, if you are still unable to enter in good trades, then maybe you are trading with too big position sizing. Decrease your position size so that you feel less pressure and can trade calmly. Through my Elite Traders Live Mentorship Program, I provide my students a proper trading system with risk management techniques because of which they do not hesitate to take the best trading opportunities.
As I mentioned before, trading is more about psychology, so rather than spending 5 to 6 hours on charts you should spend more time developing the right trading psychology. When it comes to analysing the charts, the more time you look at the charts, the more you will get confused. So, spend only a limited amount of time in front of charts which eliminates overthinking and allows you to take high conviction trades without any doubt.
If you want to know more about Risk Management & Intraday Trading Strategies you can refer to our previous blog on
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