Good morning forex friends! With 2011 quickly winding down and trading pretty much a wrap for the year, it’s time to do the most beloved (or hated) of trading tasks: reflecting on your trading performance. I’ll share with you an example of how I reflect in hopes that it will help you do your own. Check it!
Obviously, the first step to reflect on your trading performance is review your past trades in your trading journal. Now if you don’t have a trading journal then shame on you! How can you improve if you don’t even know what you did or the mistakes you made? So, if you don’t have one yet, go start one at MeetPips.com
Alright, so after reading all of my blog entries for 2011, I’ve put together these basic stats to tell me what and how I did:
No. of Trade ideas: 54
Trades Triggered: 36
No. of Wins: 19
No. of Losses: 17
Trades not Triggered: 18
Average gain per winning trade: +0.697%
Average loss per losing trade: -0.736%
Net gain: +0.737%
Just with these basic stats, I see a few things. First, the good…
I think I did a pretty good job with my analysis to find the probable direction of the market and high probability entry levels. This makes sense as my trade plan framework tends to be jumping into a trend with a matching economic/sentiment bias, coupled with a support & resistance (and sometimes divergence) as my entry signal. I won over half of my triggered trades, and after digging deeper, half of those untriggered trades would have been triggered and profitable had I did a better job with my entry (more on that in a bit).
Second, I did a pretty good job at risk management by limiting my losses. My usual max loss per trade plan was 1% of my account. Above, we can see that I kept the average loss per losing trade at -0.736%. This was due to reducing risk on some of the day trades and cutting out of trades early when the market sentiment changed. Although, I could do a better job on the latter as I did let a trade or two ride after sentiment shifting news came out.
Now, for the bad.
I didn’t do a great job of maximizing my winners. My average win was 0.697%, even though most of my setups go for a 2:1 or better potential return-to-risk. Digging back into my past trades, this was due to weaknesses my trade management technique, or should I say weakness in my trading psychology. Often, I’d try to go for a bigger profit and not take some profits of the table (like this Cable trade) at an obvious inflection point. Then a news event or reversal would happen killing my profit and sometimes turning into a loss. Or I would just take a trade off before letting it fully mature. I’ll admit that the fear of losing profits, or letting a winner turn into a loser did get to me more than it should have.
Second, I need to do a better job with my entry technique. As I mentioned above, there were about 9 untriggered trend trades, some narrowly missed by a few pips, in which I may have been too conservative with my entry. Each one would have turned out to hit max profit potential, which was probably more frustrating than the losses. I did pretty well in the first half of the year by scaling into trades, but pretty much stopped using that entry technique as the markets became even more unpredictable and choppy in the second half. I’ll look to return to scaling into trades more often as it looks like this process would have helped those untriggered trades turn into profitable ones.
Stepping away from the numbers and reviewing my thoughts on the news and fundamental landscape, 2011 was definitely tough to figure out. Actually, price action and behavior was just nuts! When Greece and the European sovereign debt crisis took center stage in the second half of the year, it turned into a news/headline trading market. The market focus and sentiment shifted almost daily by simple rumors of what a central bank, European leader, or credit rating agency may or may not do. By October and November, I reacted to this market environment by becoming way too conservative and ended up missing a lot of trades or deviating from my usual trade setups.
Overall, while I do still have some of the same issues as in 2010, I think I did much better, not only in my overall numbers, but in my analysis of the fundamentals and price action; I just need to do a better job in trade execution and management. As we’ve all heard time and time again, the entry is important, but what you do after you’re in the trade is what counts. Also, while I know I didn’t end up in the red, I know I could have done much better with a little bit more focus and discipline. Sometimes just showing up mentally prepared to take on the challenges of the day is the hardest thing to do.
Well, I hope my journal reflection of 2011 has helped guide you in preparing your own final journal entry of the year and figuring out your resolutions for 2012. So, cheers to always being prepared, to better trade management and discipline in the new year. Good luck my friends and good trading!