As it was mentioned in our previous article, the information on your past trades can considerably sharpen your trading results.
Trading statistics is your superpower.
Why? By evaluating it, you get a whole picture of your trading performance with all your strong and weak points. Then you simply improve your weaknesses (change your trading plan) and empower strong sides. Then repeat. These steps are basic for building a profitable and scalable trading system. The question is what info about trading to gather?
It can be the timeframe you were trading at, a particular time during the day, the biggest loss and gain during a day (week, month) and other peculiarities of your trades. The more, the better. Here are some key points to keep tracking:
Transaction type
Is it a swing trade, counter-trend or probably you caught a trend? Sort it out to understand what trading style is your cup of tea. Reveal the best trades and ideas to use them mostly! Also, it’s important to record the time when the position was opened and the frequency of your trades, peaks, and bottoms of the particular asset price and patterns you used. Keep an eye on these details! The combination of the details mentioned can help you make the price analysis more accurate. In some cases, it’s recommended even not to trade. Reveal these cases to have a timely rest!
Position size
Who does not feel nervous while opening a position with a considerable sum? The one who calculates the right position size! This is an important issue of money management, and it should never be neglected. The best option, in this case, is to have a formula for calculating the position size automatically based on your previous trading statistics. Get some tips on using your stats to improve your trading here.
Thus, track your position size and figure out which one fits your strategy most. With a considerable sample of trades, you are likely to reveal a “right” position size.
Position size changes during trading
Will you increase or decrease your position after you open a trade? When exactly to do it? You should have a set of principles regarding this issue. The principles should also be based on your trading history to reveal the most profitable ones.
Read more about optimal position sizing here.
Stop-loss and take profit
In short-term trades, it is necessary to be absolutely aware when to close the position if the price goes in the way you expected (take profit) and if you’ve mistaken (stop-loss). It’s a fundamental rule of risk management. In case of day trading, it is possible to bear in mind these orders and set them manually, but the rules also should be set before entering the market and, undoubtedly, should be complied with. By the way, this is one of the core rules for hedge funds as well that enables them to reach stable profitability.
The same works for the long term. Focus on the potential price movements and the limits to set on them. They can be based, for example, on the strong resistance and support levels. In simple words, the major question is how far the price is likely to go up and down? When is it time to accept that you are wrong and to close the position?
So, calculate the prices to set a take profit and a stop loss in advance. This way, you will cut the losses and grab profits timely. Read more about the danger of the overheld positions and other psychological traps in trading here.
Also note that stop loss and take profit are not enough to control your losses, therefore, also calculate and track key performance metrics.
Key performance metrics
These metrics are used to evaluate your trading performance efficiency. They are used to analyze your “naked” trading stats and to make the conclusions on your further steps. Among the key metrics, there is a profit factor, maximum drawdown, win-loss ratio, total, and average net profit, etc. All they act as the benchmarks of your trading, so, track them accurately!
Relative strength ratio
Furthermore, pay attention to indicators. For example, the relative strength ratio reveals the performance of the particular asset in comparison with the market. Does it overplay the market? The ratio can be used in selecting the most promising assets of your portfolio. The periodical reviews of this ratio can significantly adjust your strategy. Thus, track it to be aware of what’s going on with your investments. Probably, you will pick up some assets to perform other strategies with them?
Fundamental analysis
Fundamental analysis can increase the chances to see the whole picture of trading performance and even foresee some price movements. Therefore, take into account news, interviews, substantial events as sometimes they tend to influence the price in a very considerable way. Write down the way they influence your assets to understand their correlation. Obviously, you won’t get an accurate answer, however, a better understanding of the price dynamics is ensured.
Also, it is recommended to monitor the news, analytical reports and other important releases with any info that can drop you a hint on the next step of the market. Be ahead! Sometimes it is even better not to trade to secure and multiply your deposit.
To sum up, planning, controlling and analyzing are closely interconnected integral parts of successful trading. This way, you can be aware of your trading performance and can control losses and emotions with the help of Bitinsure real-time trading journal. It helps automate routine and avoid human factor mistakes. Thus, you trade, Bitinsure records. Then you use the stats to enhance your strategy. Easy!
Note that the article gives a general understanding of the trading aspects to track, giving you room for imagination. Therefore, customize these points according to your trading style and goals, track, adjust and earn! Get your own superpower in trading!
What features do you mostly consider while analyzing and planning your trades?
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