Skills to IMPROVE Successful Trading RESULTS

Improving trading outcomes allows traders to make decisions with full consideration and evaluation when trading in the market. This applies to both novice and experienced traders. This article will cover the following key points:

• What is a trading bias?
• Why do traders need a trading bias?
• How to develop a trading bias by using technical indicators.

1. WHAT IS A TRADING BIAS?

Improving trading methods/bias refers to the bias or perspective in financial markets. Traders believe that a particular outcome has a higher probability than any alternative possibility.

These trading biases are determined by technical and fundamental factors, supporting a specific viewpoint that explains market behavior. This often involves whether the market trend is bullish or bearish; signaling the appropriate trading strategy and style.

2. 5 WAYS TO IMPROVE TRADING OUTCOMES

Traders need to have the skill to improve their trading bias in order to make decisions aligned with their 8 specific forex trading strategies. The ultimate goal is to make the right decision with the amount of money they are committing. Typically, when executing a trade, investors are required to make numerous decisions, which can overwhelm them and lead to mistakes.

For example, a trader needs to identify the market to trade in, when to enter, how long to hold the trade, when to exit, and the trade size. There are many other decisions involved, such as: should I move my stop loss; should I take partial profits and increase position size (there are more choices to be made).

In the trading world, a new trader often struggles between the potential for profit and the possibility of loss. They lack the experience to control emotions during the trade setup phase. Essentially, they lack confidence and the ability to “control” a positive outcome. This is very personal, causing traders to be paralyzed by indecision. As a result, they allow emotions to steer them in an unproductive direction, and the demo trading results don’t meet expectations.

New traders tend to rely solely on the outcome to develop their awareness. The problem here is that while some of those trades may have been profitable, they carry a higher risk in the long run.

Here are the key components a trader needs to determine their trading bias:

• Which market to trade in?
• Which direction to trade?
• When should they enter a trade?
• When should they close a trade?
• What is the trade size?

2.1. Which Market to Trade In?

Choosing a market to start trading is a difficult topic for new traders. Traders are often attracted to popular markets but those may not necessarily offer the best trading opportunities.

This is not the only method traders can use to choose which market to trade in. Many traders use their specific trading strategy (e.g., trend trading) to determine the appropriate market. Other traders prefer to use fundamental analysis, such as tracking political news or macroeconomic events, as a basis for selecting markets to trade in.

2.2. Which Direction Should I Trade In?

The direction you pursue in your trading often follows the market trend, and again, it is related to your trading strategy. This could be a short-term or long-term trend indicator, depending on the trader’s preference for trade duration.

2.3. When to Enter/Exit a Trade

In trading, you will often need to combine both technical and fundamental analysis. Traders can use these two tools either individually or in combination to pinpoint the most accurate entry and exit points. These entry and exit points are often determined by technical tools like indicators (moving averages) or breakout trading using price action.

2.4. Trade Size

Trade size is essential for any forex trading plan. New traders often overlook this aspect and trade with an unreasonable size. Trade size should be considered based on the account balance. We recommend using trade size to ensure you are not risking more than 5% of your open positions in total.

3. HOW TO DEVELOP A TRADING BIAS USING TECHNICAL INDICATORS

Supporting information is provided by technical indicators. For instance, moving averages can help traders achieve a trading bias.

3.1. Moving Averages

Moving averages are another tool that traders can use to determine their trading bias. Typically, traders use the 200-period Simple Moving Average (SMA). Traders can apply this indicator to any chart.

Then, observe whether the price is higher or lower than the moving average. If the price is above the average, traders might interpret the trend as bullish and look for buy/sell opportunities. Conversely, if the price is below the average, traders may say the trend is bearish and look for sell trades.

The chart below shows a trading bias using moving averages on the GBP/USD pair. The 200-period MA is used, and the price in the chart is below the moving average. Knowing this, short-term day traders can seize the opportunity, improving their trading bias by looking for sell positions. This trend could be maintained until the price starts rising again and breaks through the moving average. The opposite is true for prices trading above the MA, as shown in the second chart.

Bearish Trading Bias:

Bullish trading trend:

3.2. Price Action

The first way to determine a trading bias is through price action. Traders can look at the chart and observe whether the price is generally rising or falling by identifying higher highs or lower lows. If the price is rising and forming higher lows, traders should form a buying bias. Conversely, if the price is falling and forming lower highs/lows, traders should develop a specific selling bias. By considering 200-300 periods on the chart, this technique can be used with almost any trading strategy.

Price Action Trading Bias on EUR/USD:

Above is the H4 time frame chart for the EUR/USD pair. Traders will begin their analysis by looking at the price data from the last 2 months. The chart above is a compilation of 300 H4 candles. Notice how the price is gradually moving towards new lows during the selected period. This indicates that the market is in a bearish trend, which allows traders to form a selling bias.