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How to maximize your gains in trading! 📈

Want to know about some tips and techniques from pro's on how to increase your profitability??

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Hello Pip Surfers! We aim to help you get smarter about your trading in 5-minute reads.

What’s on the agenda today:

  • The Fed cuts its rates by 0.50%!!! How does this impact you?

  • How to maximize your gains in trading 📈

Fed conducts a historic rate cut of 0.5%!

The last FOMC was an eventful one, with the market having expectations of a 0.25% cut, but it came in steeper at 0.5%, making stocks and gold soar on the releases.
Now that the rate is cut what can we expect going forward in the US market?

Inflation has eased significantly, commodity prices are relatively soft, wage increases are modest, and labor markets require support. The Fed anticipates economic growth stabilizing at 2%, unemployment peaking at 4.4%, and inflation slowly converging towards its 2% goal. A neutral economic climate calls for more neutral interest rates of around 3% in approximately two years. This initial 0.5% cut shows that the Fed is very much willing to support the economy if and when needed.

The last time rates were cut at this level (excluding COVID) was on September 18th, 2019. Gold benefitted over the coming months from this rising a total of 13% before COVID hit and changed the market dynamics.

Although traders had assigned a higher probability to a 0.5% rate cut before the announcement, financial markets still appeared surprised, uncertain whether the larger cut was positive or negative news. Only the following day did sentiment turn bullish, with the Dow Jones ending the week at a new all-time high above 42,000, and the S&P 500 briefly reaching 5,700 for the first time. In the bond market, the 2-year Treasury yield dipped to 3.55%, finishing the week below the 10-year yield of 3.73% for the first time in a long period. This supports the Fed’s sunny view of an economic Goldilocks scenario on the horizon.

This week, it is key to look out for any speeches by members of the Fed to gain more insight into the rate cut and any guidance for the future.

How to maximize your gains in trading 📈

There are a number of ways to maximize your gains when trading but there are few ways that are effective, some may even have the opposite effect and reduce the amount you make from a trade. We’ve done a bit of research and testing here at Pip Surfer and found a couple of ways that are let’s say the ‘safer’ way to maximize your profitability.

Way number 1; as a trader, I’m sure you have different set-up rankings based on the trade you are taking, ie A+, A , B, and C if necessary. An A+ should be one that is your ideal trade and it doesn’t come along too often but it’s the one that if presented you take it no matter what! An A+ trade should by default have a higher win rate, a higher probability of moving a larger amount of pips in your desired direction, and be your biggest winner.
Considering all these points are checked in your mind, its safe to say that due to this you can risk more on this trade yes? So if you have your standard risk parameters at 1% per trade, since the A+ just popped up on your desk, you can say double the risk comfortably to 2% as this is your prime set-up. This immediately sets you up to make more off of this trade than you would from an A, with only a 1% risk. Pretty simple, but that’s the point, in trading the simplest of things are usually the most effective.

Way number 2; profitability can also be increased by stacking a particular trade, done right it can increase your gains exponentially, done wrong you can walk away with nothing or worse, and walk away with double the loss you anticipated when you placed the trade. To do this right you need to give the market some room to move, so for scalpers, this may not be ideal and intra-day traders may find it challenging but it is possible with volatile assets such as Gold or indices. It is however perfect for swing traders as stop losses are slightly bigger allowing for more room for the trade to fluctuate while in profit.
So all this talk but how does it work??
Let’s break it down in steps.
Step1. Open your first position using a set risk management strategy, you will use half the risk percentage for the second trade.
Step 2. Let the trade run, if it goes into profit by 1:1 move your stop loss to break even.
Step 3. Once the trade has moved to a 2:1, begin looking for the second entry, bear in mind it may dip and fluctuate at this point so your first position’s SL is still at breakeven.
Step 4. Once you have entered the second trade and the trade has moved back to or above the original 2:1 ratio, lock the first stop loss to the point where the profit here is equal to the stop loss amount of the second trade.
Step 5. Let the trade run and if it is in your strategy take partial profits or close the trade accordingly.

Note this only works if your RR is above 1:1, if it is not then this type of arrangement does not yield much profitability.
We do prefer the first method but both work just as well if done correctly! Let us know if you give any of these a try and how they work out for you!

Digestible Memes 💥

You’ve heard it before… “Don’t beat around the bush”.

If you want to become a better options trader, I can’t wait to show you how to approach your trades directly and without hesitation.

Imagine your portfolio performance if you started buying weekly expirations dependent on future trends.

Thanks for reading with us today! Let us know if you gained any value from today’s article! Catch you next time 📈