This is our second article on how to be ahead of the market and multiply the deposit swiffer. In the previous article, we considered self-awareness and knowledge of basics that help build a consistent trading strategy (it can let you stay in-game even in the case of 100 losses in a row!). Exactly this is the first step to start earning more. However, it’s only a part of the system that is rather complicated and requires more actions. So, are you ready to take your trading to the next level? Then here we go! The next step is:
Experience (trading statistics, your observations)
Thus, we need some more actions to become high-achievers in trading, and observing & analyzing trading statistics is one more essential part of a winning strategy. So pay attention to your overall trading performance, trading stats and the details of each trade that reflect your experience, can give you a variety of actionable trading insights and a full picture of your trading performance and the ways to improve it.
The details of each trade
Let’s start with the details of each trade. The advice is simple. Capture the best trades with all their features (direction, leverage, position size and so on) in your trading journal and include more of these techniques into your strategy. This way, you gonna follow one of the rules of the winners:
“Do more of what works and less of what doesn’t.”
© Steve Clark
So, leverage your best techniques and reduce the trades that are not successful. Easy!
You can get the data on your trades manually or use a software to automate routine and avoid human factor mistakes. An example of a real-time automated trading journal is below:
Get actionable signals from your trading stats
The next point is to track trading statistics. No, it’s not just a history or a thing to boast of. It’s primarily a tool to make money. Yes, exactly a tool! Let’s break it down.
Gaining / losing series
The first way to improve your performance via trading stats is tracking your trades in terms of gaining / losing series (read here about the danger of losing trades!). In this case, you get valuable info on the effectiveness of your current strategy (in the current market state) and are able to mitigate the risks by tough risk management.
To clarify, if you have a streak of bad luck, you can reduce the stop-losses and position size. In this case, you’ll minimize your losses. Also, monitor your psychological state because in a long-term losing series many traders are likely to get into tilt. On the other hand, if you are a lucky one, leverage your luck! Increase the positions, widen stops (But do it reasonably! We’ll explain it below). Thus, track your performance and adjust risk and money management rules.
By the way, the statistics is calculated in real-time automatically by Bitinsure. So, you can focus on what matters most (your strategy!) and avoid routine and mistakes:
Overall equity dynamics
The second way is to monitor the yield curve. It also indicates the right moments to change risk and money management strategy. Obviously, use the periods of abrupt growth for maximizing it even more with increased positions and stop-losses (green zone). On the contrary, if you see the profitability is not growing, act more carefully, minimize your operations, positions and probably correct the strategy. Or just chill out for a while!
Measure risk tolerance
Moreover, monitoring your profitability chart, think about your risk tolerance level. In other words, decide what drawdown won’t make you panic? It’s rather about psychology. Some of us feel stress in the case of a 10% drawdown (conservative type), while others keep calm with 60% loss (aggressive investor type). This level may change over time: Sometimes traders start from aggressive strategies, but with the time become conservative investors. So, always pay attention to your deposit drawdown and evaluate how painful it is for you. Obviously, you need to track your profitability and drawdown to assess it. Do it manually or via special software (illustration is below):
Generally, an overall deposit drawdown of 20% is considered to be a “normal” average result.
You may ask how it’s related to risk management. It has a direct impact! Since you know your risk tolerance level, you are able to limit your drawdown. It means that you will lose exactly the amounts comfortable for you. Hence, as soon as your maximum drawdown is reached, stop trading, chill for a while, adjust your strategy if needed and… Welcome back with new ideas! In this case, you avoid a problem of overholding losing positions that puts your deposit in danger. You can monitor and control your drawdown manually or via professional trading software that will also control your drawdown at several exchange accounts, according to the limits you set:
And send security notifications or even close the position automatically as soon as the limit is reached. Email and Telegram alerts are available! So, Drive your losses!
All this will block the vulnerabilities and enforce the strengths of your strategy that is likely to increase your profitability! You already have a powerful set of tools to grow the deposit, but we have one more tip: deeper analysis of your trading stats that is the topic of our third article about the ways to multiply the deposit. Read it right now and improve your trading performance!
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