What is a Perfect Trade?

Simply put, a perfect trade is a trade of which a trader can be proud of regardless if it is a winning or a losing trade. The thing is, it is impossible to win all the time so traders should focus on making trades that have a high chance of winning. So what are the attributes of those trades? Let’s consider them. 

Entry: The most important part of every trade is the entry. It should be made at a right place in a direction of a trend. The closer it is to a support / resistance area the better. Generally, buy trades should be opened in a support area of an uptrend and sell trades should be opened in a resistance area of a downtrend. Alternatively, buy trades can be opened on a breakout of a downtrend and sell trades can be opened on a breakout of an uptrend.

Take profit. It is generally a very good idea to set up a take profit level together with a newly opened trade. If it is set, there is no need of a constant monitoring of a trade. It frees a lot of time which can be spend on other more meaningful things like looking for new trading opportunities. However, ideally take profit levels should be set up closely to the contrary side of a trading channel or to an opposite trend line. The problem is that they move in time so it is a challenge to predict where the opposite support/resistance would be in the future. To overcome this issue, traders can use previous horizontal support/resistance lines or just put take profit levels at the current opposite side of a channel and leave it there.

A perfect trade should also have a wider take-profit level than a stop-loss.

Stop loss. This level is a must for everyone who trades in financial markets. Ideally, it should be set slightly lower than the support area in a case of a buy trade in an uptrend or slightly higher than the resistance area in a case of a sell trade in a downtrend. Moreover, it should not be set up at any other support or resistance areas. Financial markets have of a lot of those less significant support/resistance areas and stop-loss orders should be set between them in order to lower the potential losses. Any support/resistance area can reverse the price so it would be wrong to set up a stop-loss level where the market can potentially reverse and go in the favor of initial guess.

Finally, a perfect trade should have a proper lot size according to the chosen time frame. Trades opened on a daily time frame, for example, should have very wide take-profit and stop-loss levels so it could take days in order to hit either of them. However, it is very important to trade them because these signals generally have 60%+ winning chance so it is acceptable to use higher lot sizes of up to 2% risk per trade. If there are no signals on a daily time frame, traders can use H4 time frame with lower take-profit/stop-loss and smaller lot sizes because they also represent good trading opportunities.