Now, if I seriously had a dollar for every-time I was asked this question…
This is a concern of many traders, but hey, it is really important for traders to understand before they start cranking out 100 trades a day, right?
On any given week there can be 100 trading opportunities or there could be none. The truth is, the number is completely different for each trader.
It comes back to a range of factors: risk appetite, capital at hand, trading strategies, time available to trade and how patient the trader is.
But coming back to a simple concept that covers all traders, think of it this way:
How many ‘Low Risk – High Probability’ trades are there each week?
What do I mean by ‘Low Risk – High Probability’ is a Technical Trade with a Fundamental Driver! These trades aren’t around each day but when they go off they return big profits.
How do I find these trades?
Well I keep a simple habitual routine whereby I check the charts (technicals) and global economic calendar (fundamentals) each day.
That way I know where the key levels are (on at least the majors) and I know what key economic releases may have a major impact.
So, when you look at the market this way the question of ‘How many trades can you expect each week?’ is going to be different each week as there are different releases each day and each month. The cycle of data is never exactly the same.
Plus, the Geo-political backdrop, another major Fundamental aspect to consider, can change very quickly and that can change the trading opportunities very quickly. It can increase or decrease them.
Note for beginners: in case you are not aware of how to interpret the fundamentals and take advantage of them, we offer to rely on technicals only (indicators) avoiding any big news announcements.
Every trader is different
So, if you’re an extremely disciplined and patient trader you will wait for these… about 5 trades each week.
If you’re a more aggressive risky trader and you really want to get stuck in. That way you may have 10-15 trades each week.
If you’re super aggressive and ‘wild’ then with this appetite you will have around 100+ trading opportunities each week. Basically, every time you turn the screens on your trading regardless of what’s going on.
There’re two ways to look at this:
1. How many actual trades?
2. How many actual transactions?
It’s very important you’re not confused by the two.
As I mentioned above, we may have around 5 good trades this week. Inside those ‘good trades’ we may buy and sell many times taking advantage of price retracements and general price action movements.
So, in reality in amongst those 5 good trades we may have 20 transactions – whereby we buy and sell over and over.
This is very common especially when we have specific direction. You go with the momentum then take profit. Then reload on next move and take profit… and so forth. That way you can maximize the opportunity.
How do I adjust to the various opportunities?
Now there’s a simple process of ‘trade size’ adjustment if you want to try and include more trading opportunities.
Well first of all I don’t limit the number of trades each week. On Monday I assess the economic data scheduled for release and then I’ll have a general idea of how many ‘potential’ opportunities there are for the week.
It’s the economic data that provides the currency movements. If there’s no economic data then the currencies would barely move.
Of course, you need to consider the technical set ups every day. Some weeks there’s loads of great set ups and others, especially after big central bank announcements, there’s none.
But this is the simple technique I have employed for many years:
1. I grade the opportunity according to what I believe this is the probability of success. (this is generally a percentage)
2. I adjust my position size depending on the percentage
So, if I see a trade with a great Technical set up and we have a major Fundamental driver putting the trade in play I would rate that at least a 90% chance of success, if not higher.
90% probability of success = full trade size (or even 150-200% of normal full trade size).
Note: I never consider any trade 100% probability, as that’s a recipe for disaster.
Now I know it may be hard for every trader to work this percentage out as it’s a major experience factor to judge the potential of a trading opportunity and that’s why we have the live trade zone to bounce those ideas around.
But in general here is a table of how I adjust the trade size – it’s common sense really.
Probability of Success Position Size
90%+ 2-3 lots
60-80% 1 lot
50% (lowest you would go) 0.5 lot
So basically, what you’re doing is adjusting your ‘risk’ according to the opportunity. The higher the opportunity the better the chance to make cash, so you want your full trades on those opportunities.
What most traders get into the trap of is increasing their trade size regardless of the opportunity. Purely based on recent success most of the time. They take huge hits on trading opportunities that they should have stayed away from or at the very least decreased their exposure on.
By following this method and incorporating the ‘4 consecutive loss rule’ you will be set up to trade like a Pro and you will definitely avoid those large draw-downs that really slow you up.
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