By now, you’ve probably heard about most, if not all of these trading tips:
- Always trade with the trend
- Let your profits run
- Psychology/Discipline is more important than strategy
- Only take trades with a risk-reward ratio of at least 1:2
In my opinion, the reason these “tips” are so popular is because they are simple to understand, rather than because they are effective in practice.
I mean sure, they make sense conceptually.
But theory and practice often diverge, especially in the unpredictable world of trading. What seems like a good idea at first, often does not translate into the results you’re looking for.
After all, many retail traders follow these tips and lose money in the end… so it’s clear that things aren’t quite so simple.
Perhaps then, it is time to start questioning the validity of such conventional trading wisdom.
Start by asking yourself, “what if I did the opposite of what people say?”
Instead of trend trading, try counter-trend trading.
Instead of letting your profits run, try setting conservative profit targets.
Instead of a risk-reward ratio of 1:2, try 1:1… or even less!
I’m sure you can come up with other ideas…
Of course, you’ll want to be smart and test them on a demo account.
If Your Tests Made Money
If you end up making a profit from your tests, you could be on to something.
The key then, is to figure out why you’re making money doing the opposite of what everyone else is doing.
Valuable lessons can be learned there.
If Your Tests Lost Money
If you lose money on your tests, you’d also want to figure out why.
How come you’re losing regardless of whether you follow conventional trading advice, or do the opposite of it?
What could that mean? What does that suggest about your trading?
Again, some valuable insights can be gained here.
Different Strokes For Different Folks
There is no one best way to be trading, as everyone responds differently to each trading approach.
So what you want to do is to find out the type of trader you are, by doing the opposite of what you’ve been trying to do, and observing your experience of it (and of course, the results).
Just like how a fish doesn’t know it’s in water until it’s been taken out of it, you won’t know what your trading blind spots are until you try something dramatically different.