Ways to enhance your trade plan
Once you’ve developed enough confidence in your trading skills and strategy, you can work on improving and enhancing your profit potential. Of course these changes must be carefully thought out and implemented gradually so as to not cause any sudden changes in your psychology or account.
One way to enhance your current trade plan is to look at other currency pairs. If your current system is focused solely on EUR/USD, you can run back tests and forward tests on a different pair, such as GBP/USD or USD/JPY. If the tests turn out well, then you can also look into applying the strategy on these as well and increase your profit potential.
Keep in mind though that some forex pairs are more volatile than others or respond to inflection points differently. Some adjustments might need to be made with your indicators or entry and exit points when you are considering applying your system on yen pairs or currency crosses.
Another way to step up your game from your current trade plan is to look at shorter-term time frames for more trade opportunities. This kind of enhancement is not applicable to some traders, as some time frames have been pre-determined based on their trading schedule or lifestyle. Nevertheless, if you are looking to zoom in to shorter-term time frames, you should look into adjusting your stops and profit targets as well.
Adding strategies for increasing your position size or pressing your advantage is another way to improve your trade plan. Quite too often, trade plans might have a simple stop loss or profit target that is specified. However, this might wind up limiting your profitability and preventing you from staying in a trade much longer when trends are strong. In this case, you can look into strategies that allow you to maximize your profit potential with the necessary steps to minimize exposure or lock in profits.
One such strategy involves having a trailing stop and additional trade entries. Instead of having just one profit target of a hundred pips, you can look into adding another position or a half position every 100 pips and trailing your stop by the same amount. This way, you are staying in the trade if the trend continues but you are also locking in profits as you go along. This enhancement can drastically improve your expectancy and reward-to-risk ratio.
Additional technical indicators can also be added if you’re looking to enhance your trade plan, but remember that sometimes simplicity is key. When you have too many indicators, they might wind up contradicting each other and not generating any valid signals at all. Just make sure you run tests on these strategies before trading it on a live account.
With all these potential changes, it is important to keep track of your results and how these affected your account and trading psychology. Take it one change at a time so that you can determine if that particular tweak did result to an improvement or not.
Next Article: Adjusting to changing market conditions