Trading Strategies: When One is Better Than Many

Using multiple trading strategies can make trading more challenging. Not only do you need to learn various different techniques, but in practice, it also becomes more complicated because several strategies often provide conflicting signals. As a result, we often find ourselves confused about which trading opportunities to take. Furthermore, we often combine multiple strategies into one without considering their probabilities.

Frequently, when trading, we open a position based on a specific pattern, only to hastily close it when another pattern emerges.

 "But I'm only using chart patterns. Isn't that just one method?"

 What is meant by trading with one method is trading using only one type of pattern.

When traders use chart patterns, most of them utilize all the patterns classified as chart patterns. They seize every trading opportunity that arises in the market, whether it's ranging or trending. However, not all chart patterns have good probabilities. The same applies when using Elliot Wave, candlestick patterns, Dow Jones trend theory, or other theories. Each theory typically consists of a collection of patterns, and not all of them can be relied upon for trading. Moreover, each pattern usually has high probabilities in certain pairs and low probabilities in others.

When traders use all these patterns, they will profit from those with high probabilities. However, those profits will decrease, and even turn into losses, when trading with patterns that have low probabilities. The best approach is to only use reliable patterns and stop using those with low probabilities. It would be even better to choose just one pattern. By doing so, you will quickly understand the characteristics of that pattern and optimize it for trading.

For example, if you choose to use double top and double bottom patterns, you will only enter trades when these two patterns appear. You should not force yourself to trade when other patterns emerge in the market.

 "Doesn't that mean we'll be trading less often?" 

Yes, you will be trading less frequently. However, the goal of trading is to generate profits. Most people prefer to do less work and earn profits rather than doing a lot of work and incurring losses.

Even when day trading, you don't need to trade every day. You only trade when there are opportunities. Intraday, swing, and scalping are terms used to describe trading styles based on holding periods, not trading intensity. Intraday trading involves holding positions for less than a day. Swing trading typically involves holding positions for several days, weeks, or even months. Scalping, on the other hand, involves holding positions for several minutes to several hours.

However, if the intensity of emerging patterns is too low, you can add more pairs to trade. If that's still not enough, you can add more patterns to your trading method. Nevertheless, do not add them without backtesting them first. If you don't, instead of helping you generate profits, it may lead to losses.

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