Jaroslav Kohout
Brief Nuggets Of Trading Wisdom – Trade Considerations Introduction
Our attention is being bombarded by so much information in the world of trading. In this post, I will try to compress for you the key points that stood out for me in the selected AXIA Instagram posts. I will focus on things a trader should consider before taking a trade. These trade considerations might seem obvious at the first sight but usually become more nuanced when looking closer.
A breakdown below presents a trader with a set of clues to consider. One of the articles you can read on stalking the clues can be found in the “Stalking Trading Clues Leading To Inside Day Break“.
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Trade Considerations Nuggets
Risk Reward Equation
Risk reward (RR) equation is about how much we risk vs how much we can get. On the outside, this equation seems elegant, almost too dogmatic. The problem is that it is too simplistic. Many times in my trading I have fallen in love with the idea of the “favorable” RR only to completely miss if this RR is realistic.
My takeaway: don’t be mislead by RR only, combine it with the probability/chance of getting that RR. Sometimes I use two variables. RR and Confidence. With confidence, I use a scale of 1-5 with 5 being the highest and 1 the lowest. If the RR is 4:1, I evaluate also a confidence variable. What is my confidence with the trade that it will really get that favorable RR. If it is lower than 3 (including 3), I know it is not an ideal trade.
What Is Better Trade To Take
This directly correlates with the RR equation above. In this case, one has a more favorable RR than the other. Given the clues Richard has explained, which one would you take?
My takeaway: I would rather take a smaller RR, but better (more vulnerable target structure), than a higher RR in which I would feel less confident. What would you do?
Building The Wisdom Through Failure
Through hell of a failure, we build wisdom. Many of the trading experiences are painful and unfortunately, we repeat them many times over. It might sound obvious but there is no escape. You will most likely suffer before will start making any money.
My takeaway: intellectually we all understand that, but only showing up every day, learning from the mistakes without the pressure of having a time by which we have to succeed can get us closer to consistent profitability. I have noticed that the best insights come after the hardest tests (big drawdowns). Don’t rush things after they happen. Let them settle. Some time ago I used to continuously fade the trend days because I hoped some fancy old levels would hold. I must have done it 100 times and got burned until once it was so painful, that I stopped.
The Should Trade
The Should trade is when the market should do something, and if it doesn’t do it, should you get out of the trade? Easier said than done, especially when we have invested a lot of energy into a trade, let alone failed attempts trying to get into the trade. The more we are getting attracted to the trade, the more irrational we might become and miss important clues and nuances that tell us, “the should” did not happen.
In the example described by Richard, we have approached the level of a possible breakout for the third time in the Bund. Observing the price ladder, there was a point from which the market “should” go. Lots of reloading and pulling, aggressiveness from sellers, and the inability of buyers to lift the offer caused the market to fail and follow not through. The “should” did not happen.
My takeaway: understand very clearly, what you want to see on the break and don’t compromise. I was once told by the Elite AXIA trader that it is understanding your expectations for the move from the moment you enter to your target (A to B move) that gives you the edge to hold or fold. We all train to identify the opportunity which trades to enter, only to completely miss the mastery of the A to B moves.
Thanks for reading, don’t forget to check our content on AXIA Instagram.
If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profile, footprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.
Trade well.
JK
