We are in the fortunate position of being able to see some of the world's best traders battle it out for some incredible prizes.
Today we are going to take a look at five strategies every trader should master to help them generate better trading results.
We've reviewed countless trading accounts and their respective equity curves.
We've analysts their data to dive into what we believe are the keys to their outstanding trading results.
And today, we've shortlisted what we believe are the best strategies they've used to generate exceptional results.
Let's jump into it.
Confidence in trading can never be underestimated.
You have no doubt experienced this at one time or another, when your trading system is in sync with the markets and the trade wins flow.
When it comes to a trading contest like the Trading Cup, nothing beats setting a positive tone for the month by getting off to a good start.
Of course, it helps to start winning on your trades but what I’m talking about here is trading small, experiencing your losses, keeping them small and giving yourself the opportunity to have some small wins.
Nearly every trading system has losses that get executed well before the winning trades hit your account.
The reason for this is simple.
The average time it takes for a loss is shorter than the average time it takes to lock in a winner.
Trend following trading systems
It is not uncommon for trend following trading systems to lose on 70% of the trades.
Trends take time to unfold
Zhen Wang’s trades are pictured below, highlighting that for the first day of trading, nothing happened to his account except to track sideways.
Fortunately, Zhen never locked in a loss to start the month, but instead, cautiously entered Gold during a consolidation period.
Then even on his subsequent positions where he added to his existing long trade, the market tracked sideways, providing no signal that his account was about to catapult forward.
The key is when starting, trade small, and let the market tell you when your system is in sync.
Don’t try and force it
The worst thing you can do is start trading aggressively, endure larger than average losses, then spend the rest of the month trying to fight back.
Nothing is worse than when you are on the ropes, and your opponent (the market) is doing everything they can to bring you more pain (more losses).
You are already aware of the fact that our Trading Cup contest is run over one month.
This means you don’t have time to start testing different strategies and ideas.
Instead, your goal is to work with the current BEST trading strategy and execute it with precision, minimising the number of errors you make.
By sticking to a strategy you know inside out, it should reduce the number of mistakes you make and any second-guessing.
Over-thinking is a common problem for traders. Should I enter now? What if the trade moves against me? Will this win? How much money should I risk on this trade? How will I catch the leaders?
You could have a dozen questions going through your mind on every trade.
You could know exactly what a trading opportunity is for your system and execute your entries and exits without any unnecessary thinking.
Your job as a trader is to hit your trading rules as they happen.
When an opportunity arises, you take action, allocate a relatively small portion of risk to the trade and wait for either a stop loss or profit-target to be hit.
Having run our trading competition for 3-years now, we know for sure that certain strategies are perfect under different market conditions.
But the challenge is we never know when our strategy will be ‘perfectly’ in sync with the market.
If you already know the key numbers of your trading system, then you will know that to realise the expectancy of your system, you need to take each trade your system generates.
Dr. Van Tharp emphasises the fact that your money management rules are there to help you meet your objective.
Your trading rules help you enter and exit the market.
Then your backtesting results tell you all the statistics behind your methodology.
But to reach your financial goals, you need to apply the right money management strategy that keeps you in the game and balances the risk and reward of your strategy.
Some systems allow for a higher risk per trade, whereas others are limited to risking a small portion of money on every trade.
For example, if you trade trend following systems, which traditionally have a high loss rate, you cannot afford to risk too much on any one trade.
Instead, you’ll have to focus on risking a small amount of risk in order to wait for the potential bigger trend to unfold.
The key reason behind the success of Zhen Wang in stage 2, was his ability to add to his winning positions during one of the strongest trends we’ve seen.
It was his money management that enabled him to minimise his risk as the trend continued in his favour.
But if he were to aggressively add to his positions too early in the piece, or perhaps as the trade moved against him, then he would not have been able to generate such lofty returns.
Riding winning trades is exciting.
It doesn’t matter if the wins are small, getting on a solid trending trade that continues to move in your favour, feels great.
What we’ve noticed among our leaders is their ability to know when to push when conditions favour their trading strategy.
One strategy the more aggressive traders implement is to risk more of their account when in profit.
For example, let’s say you get off to a good start in the first week of trading.
You can sense, based on previous backtests and live trading, that your strategy is in sync with the market.
Based on this knowledge, you decide to allocate more risk to the next trade or continue adding to your winning positions.
You might typically risk 2% of your account in the trade, but because you are currently sitting on a handful of winning trades, you may decide to allocate a higher percentage on the next few trades.
The key is to risk an amount you are comfortable with, knowing that you are risking your profits.
Many professional traders have a small window in the month or year where their system is working better than normal.
Therefore, it is critical to plan and build a strategy that allows you to take advantage of a potential purple patch.
There are many reasons why a leaderboard in trading is a great idea and can spur you to greater heights. Click here to see the top 3 reasons why a leaderboard is important.
But when the heat is on, your job is to execute your strategy flawlessly.
If you are spending time looking at the leaderboard, then you cannot be focused on your trading.
Know the numbers of your trading system and be confident that you and your system will have done everything possible to maximise your results for the month.
Everyone has seen the most extraordinary sporting blow-ups.
Golf is one classic example of the leader checking the leaderboard, only to get tight down the final few holes, and blow a comfortable lead.
Greg Norman had a six-shot leader going into the last round with Nick Faldo in the 1996 US Masters.
Incredible pressure was riding on this as Greg could potentially become the first Australian ever to win the US Masters.
Instead, Greg ending up losing the final by five shots. A historic 11-shot turnaround on the last day.
Augusta National is famous for having leaderboards all around the course, tempting the leaders to get side-tracked and falter over the closing stretch.
Your goal is to focus exclusively on the next trade.
Take the next trade as your system is designed.
Mike Bellafiore is the Co-founder of SMB Capital, a prop trading firm in New York City. He is also one of the best trading educators in the world for high-performance traders.
His motto, and best-selling book, is ‘One Good Trade’.
This means, focus on one good trade, then the next one, then the next one.
Don’t get ahead of yourself. One Good Trade.
Forget the leaderboard and focus on One Good Trade.
Your trading system is a set of rules. Follow those rules one trade at a time.
Everything else will fall into place.
Are you ready to join the next Stage? Click here to register an account.
Ashley Jessen is the author of CFDs Made Simple and Chief Operating Officer at ACY Securities. He has been in the financial services industry since the year 2000 and worked for some of the leading companies in the CFD, Forex and Online Trading space.