The world of trading is all about making money, but one of the most asked questions is “How can I make more?” If you’ve got a performance review coming up and are looking for some inspiration, this post is going to explore some of the ways you can better your performance and keep your bosses happy.
Trade More Instruments
If you’ve already got a proven strategy that you’ve tried and tested, the next thing you need to do is add more instruments. However, while it might seem like the smart thing to do you will have to be careful. I will undoubtedly increase your performance, but it could also result in a lower trading performance. The reasons for this are:
- Different instruments behave differently with regards to overall volatility and general price behavior. Stop loss and take profit strategies that work on one instrument, might not work on another. One instrument might follow certain patterns accurately, while another might disregard them all together.
- You’re increasing the risk to your overall trading performance by adding correlated instruments. You’re mainly increasing risk due to a greater exposure.
Trade Lower Timeframes
Trading lower timeframes is the next thing to think about. It seems like an easy way to get more trades and potentially more winners, but is it true? You’ll need to keep the following in mind:
- Price action is completely different. Intra-day spikes can be sizable and news announcements can result in large price spikes that might not change the overall direction, but will shake traders out of their positions.
- Psychological pressure increases. This means that the likelihood of making emotional trading errors also rises sharply. When the time between trade setups is small, traders may be more prone to revenge trading and interfering with their trades, because all they see is the markets moving rapidly.
- If you’re going to trade lower timeframes, you’ll need a solid trading plan. When markets move fast, you don’t have the luxury of sitting back and thinking long and hard about what to do. Instead, you need to have a trading plan in place that tells you exactly what to do and when to do it.
Increase Position Size
If you’re ready to take your trading to the next level, improving your position sizing is a good way to do it. Not only will you increase your equity growth, you’ll also limit and regulate drawdowns by applying a better position sizing technique. As you might expect, there are pros and cons of this approach:
- Studying new instruments isn’t necessary and you’re not under the same psychological pressure as you would be trading lower timeframes.
- Once you’ve a tested and proven strategy, you can increase your overall performance by taking a larger position.
- If you follow a flexible position sizing strategy, you can limit drawdowns and reduce account volatility.
- You can’t increase your position size until your strategy has been tested and evaluated. If you don’t collect data about your performance, increasing position size will end in disaster.
- You can only adjust position size when you’ve tested and calculated your actual winrate and the possibility of losing streaks.
Add a Second Strategy
Option number four is to add a new trading strategy. If you choose this route, you don’t have to worry about correlated instruments increasing your risk. In addition, there’s no added psychological pressure and increased position sizes that have the potential to ruin a trader.
However, adding a second strategy does have its pitfalls, for example:
- You could take months or possibly even years to learn a new trading strategy and it could impact on your current trading performance and focus.
- If the new trading strategy is not completely different, you run the risk of getting similar trading signals and not adding an independent variable. All you’d be doing would be increasing the frequency of similar trades.
However, if you’ve already got one trading strategy that performs well in a trending market, adding another method that allows you to trade range bound markets and make a profit means you’re getting the best of both worlds.
Improve Your Current Strategy
The previous suggestions have their pros and cons, some more and some less than others. However, imagine if there was a way you could increase your trading performance without having to worry about potential problems or traps. The most obvious way to improve your performance is to work on improving your current strategy.
It’s easier said than done, but there are only a few, if any, downsides of this approach. Here are a few tips on how to do it:
- Data tracking: You’ll need to do a lot of data tracking, analyzing and trial and error. It’s not something most traders enjoy, but it will make the difference between being an average losing trader and a professional winning trader.
- You could tweak your trading strategy by optimizing stop loss and take profits, entries, holding time, trade management, and by being aware of your emotional and psychological shortcomings.
- Be prepared for this approach to take a long time and you’ll find yourself trying various options.
All the tips mentioned above have the potential to increase trading performance. However, it is down to you as a trader, to find out what works best for you.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.