Profitable Trader Using SOP
In factories, to ensure consistent production of quality products, there are Standard Operating Procedures (SOP) to follow. Strict adherence to the SOP will ensure a consistent yield of high quality products and profits for the company. Similarly, trading profitably encompasses more than just technical knowledge. Having a trading SOP and sticking to it will help you yield better results.
Defining your SOP
- Allocate a percentage of risk (of your capital) to be taken per week/month e.g. 5% or 10% of capital. Work within this budget.
- Determine position sizing for each trade. One of the method used is the Risk-Adjusted-Position-Sizing http://www.terraseeds.com/blog/2015/04/tips-managing-calculating-position-size/
- Set a stop loss and stick to it. Many times, money is lost not from poor trade analysis but from stopping yourself out prematurely or holding on beyond the Stop Loss level.
- If you have missed your desired buy/sell price, reassess for the next best entry price. Do not chase a run away trade.
- Wait for triggers, do not jump the gun. Patience is a virtue in trading.
- Set Take Profit levels and/or shift Stop Loss levels once there is a day/week close below/above any market defined support/resistance levels. Ride a good trade but also be mindful not to let a profitable trade turn to a loss making trade.
Forex trading can be an emotional roller coaster. You are not a robot and many times your emotions get the better of you. Profitable Trader needs a SOP will help keep your emotions and account in check and avoid bankrupting your account. You may not attain 100% success for all trades entered but how you manage your trades will determine your overall profit/loss.
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