Successful trading is an art that demands more than just intuition; it requires a strategic foundation that stands resilient - Not only through market shifts but a trader’s own emotions as well. At the heart of this foundation lies a singular, indispensable pillar: the use of an easy money trade strategy. This isn't just a guiding principle; it's your linchpin for consistent profitability. In this article, I’ll break down the components of an easy money trading strategy.
Essential Characteristics of an Easy Money Strategy
The hallmark of a successful strategy lies in its simplicity and effectiveness. If you are looking to develop your own easy money trading framework, make sure it features these characteristics:
The setup should be easily identifiable intraday
It should materialize frequently (preferably more than once a day)
It should provide a clear confirmation of your thesis
It should offer a minimum reward-to-risk ratio of 2:1
Simplifying these components ensures that your strategy is not just a theoretical concept but a practical and reliable tool. If you can secure a trade with these 4 components, you are well on your way to an easy money trading strategy.
The Magic Number: R-Multiple
R-multiple (reward:risk) is frequently overlooked amongst new and developing traders. It is a concept that acts as the compass guiding your trading decisions. With a minimum ratio of 2:1, this becomes the golden rule—ensuring that for every unit of risk undertaken, there exists the potential for a twofold gain, minimum. By focusing on your R-multiple, you are forced to consider your downside before executing a trade - If you find yourself calculating your R-multiple after taking an entry, there is a good probability your actions in the market are closer to gambling than trading with an edge. The best setups will often offer R-multiples that are way higher than 2. For example, the Two Hour Trader framework often has setups that offer a 5+ R-multiple!
Balancing Act: Strategy vs. Psychology
While the significance of trading psychology is often stressed in the trading education space, an adeptly crafted strategy is equally—if not more—important. A robust strategy inherently aids in managing emotions, transforming the rollercoaster of trading into a smoother and more controlled ride. If you have phenomenal entries, you won't be as emotional about the trades you are putting on. Remember that no amount of trading psychology will make you profitable if you do not have a real edge in the market. When developing your easy money trade, be sure you are collecting the results of every play either via back or forward testing. With a large enough sample size, not only will you have a strong understanding of the different ways in which your setup can unfold, but you’ll also have proof that the setup you are trading has a real edge - And this helps add conviction to your approach, which also helps with the psychology aspect.
Conclusion
Remember that the key to an easy money setup lies in simplicity, frequency, confirmation, and a minimum of a 2:1 reward-to-risk ratio. Be sure to back or forward-test the setup (this can be done with a simulator or paper trading, just be sure to use live data) so that you can verify the results. If doing all of this sounds like too much work, or if you don’t know where to begin, check out the Two Hour Trader framework. This is a great place to start for new and developing traders and will provide you with a setup that has a real edge in the market. Finally, if you need help developing your own easy money setup, sign up for our 1 on 1 mentorship program or the Trading Mentorship Group.