Treat Your Trading Like A Business

You're The CEO, Your Strategies Are Employees

While I don't want to get too deep into a "mindset" type of discussion, I think it is at least worth exploring the concept of viewing your trading career as exactly that, a career. This is something you should be considering as a long term business investment, not for short term gains. 6 months, 1 year, 5 years. Will you still be trading? Or will your business go bankrupt?

 

Your Strategies Are Your Employees

You should treat your strategies like employees. If they're not working for you, do a performance assessment, and if you find that your strategies are failing you, fire them. This doesn't mean your employees can't take a vacation for a week or have a difficult time for a short period (i.e., drawdown periods). It means that if your strategy performance is failing what you expected from backtesting (win rate, drawdown, max losses in a row, etc.), then you should consider a new strategy.

 

5 Ways to Use an RSI in Trading

 

The relative strength index (RSI) is a popular technical indicator used by traders to analyze the strength of a security's price action. It is a momentum indicator that measures the speed and change of price movements.

There are several ways in which the RSI indicator can be used in trading:

REVERSALS:

• The relative strength index (RSI) has an overbought level of 70 and an oversold level of 30. When the RSI is above 70, it indicates that the security may be overbought and therefore potentially ready for a price reversal or decline. Conversely, when the RSI is below 30, it suggests that the security may be oversold and potentially ready for a price reversal or rally. This is known as a reversal strategy, which seeks to profit from a change in trend.

  However, it is important to note that relying on this strategy to detect a change in trend can be risky, as the trend is generally considered to be a trader's friend. It is generally more advisable to trade with the trend rather than against it. Therefore, it is important for traders to use other technical and fundamental analysis tools in conjunction with the RSI to confirm the validity of a potential trend reversal before making a trade.

DIVERGENCES:

• Traders can also use the RSI to identify divergences, which occur when the price of a security moves in the opposite direction of the RSI. A bullish divergence occurs when the price makes a new low, but the RSI makes a higher low, indicating that the underlying strength of the security is improving. A bearish divergence occurs when the price makes a new high, but the RSI makes a lower high, suggesting that the security is losing strength.

TREND

5 Ways to Use an MACD In Trading

 

The moving average convergence divergence (MACD) is a popular technical indicator used by traders to analyze the strength and direction of a security's price action.

Here are five ways in which the MACD can be used in trading:

 

TREND IDENTIFICATION:

Traders often use the MACD to identify potential trend changes in a security's price. If the MACD is consistently trading in a narrow range, it may indicate that the security is range-bound, meaning it is fluctuating within a specific price range without a clear trend. When the MACD breaks out of this range, it could signal a potential breakout in the price of the security. For example, if the MACD has been consistently trading in a narrow range but then suddenly breaks above or below this range, it could indicate that the security's price is about to make a significant move.

DIVERGENCES:

Traders can also use the MACD to identify divergences, which occur when the price of a security moves in the opposite direction of the MACD. A bullish divergence occurs when the price makes a new low, but the MACD makes a higher low, indicating that the underlying strength of the security is improving. A bearish divergence occurs when the price makes a new high, but the MACD makes a lower high, suggesting that the security is losing strength.