Elements of a successful trade
- Price Action
- Risk Management
Trading with the trend increases the chances of success greatly. If you trade with the trend while the trend is still going full force, you are guaranteed to be profitable.
Even if price goes against you, so long as you do not run out of margin. Due to the constant risk of trend reversal and margin calls, a stop loss is needed to safeguard against ruin. Using a few more techniques and strategies to get the best entry will optimize picking the best entry into the continuation of a trend.
Price Action analysis gives high probability setups for entering into a trade. While they may not give the absolute best entry (temporary counter swings to the trend can still occur past highs/lows indicated by price action), they limit entries and give a defined stop loss. With this you can then apply risk management strategies to the trade to insure that a loss will not hurt your account.
Trading into momentum can help reduce draw down. If the momentum is strong enough, it will carry price far enough from your original stop loss to make moving stop loss to break even quick and easy. Using a momentum strategy as further confirmation to a price action breakout or price action continuation can further improve an entry and lower risk.
Retracement levels, Pivot points, Psych levels, and Moving averages can help you plan your strategy far ahead of time. With these zones you can map out “hot zones” on charts, minimizing exposure and only entering when multiple conditions favor your entry.
The only 100% certain thing in trading is that some or many trades will lose, and that a well thought out risk management strategy can counter this. By limiting risk you can survive long losing streaks and still come out profitable in half the trades.