“How can you increase your trading performance?”, is a commonly asked question. In a different article we already provided a few tips that can help you to find ways to become a more profitable trader. In the following article we show you how you can increase your performance by analyzing your trading performance data in an efficient way.
#1 Impacts of your trading behavior
Most traders exclusively focus on the risk reward ratio upon entering a trade. But just think about all those times when you moved around stop loss and take profit orders, or closed a trade ahead of your take profit.
To understand your trading behavior, it is important that you track and evaluate both, the risk reward ratio when you enter the trade and when you exit your trade. Being aware of how your decisions impact your trading performance can help you easily spot negative patterns in your trading.
#2 Tracking price behavior effectively and improving your orders
Another important statistic, when it comes to understanding your trading performance, is tracking the price range during the duration of your trades. How often have you been in profits on a trade but it did not make it to your take profit order? If you continuously see this happening to you, setting your take profit orders a bit closer can significantly increase your trading performance.
On the other hand, if you set your stop loss orders too far away, you are discounting your risk reward ratio and, therefore, the whole expectancy of your trading method. If you see that price rarely comes close to your stop loss order, you can increase your performance easily by using smaller stop loss orders.
#3 Personalized and quantifiable data
When traders analyze their performance, they usually throw all their data together and then try to make sense of it. Often, traders trade different setups, combinations of indicators or use different trading tools to make trading decisions. Furthermore, traders deal with very unique problems and face individual problems in their daily trading.
Do you often widen stop loss orders, add to losing trades, close trades too early, enter too late, take trades that are not in your trading plan or move stops too close? These are just a few of the unique problems that traders deal with and understanding what makes you do certain things and how they impact your performance is indispensable if you want to break bad habits.
#4 Project your future performance
When you know your performance statistics and trading behavior, you can project your performance into the future to understand risk parameters much better. You can then evaluate what to expect and how likely certain scenarios are. Furthermore, projecting your performance and possible scenarios into the future can help you optimize your risk and money management to avoid big drawdowns or other challenges.
As you can see, by correctly and efficiently tracking your performance metrics, you can find various ways to increase your performance. While amateur traders only focus on finding better entries or indicators, the professional traders understand that there are multiple ways to increase trading performance much faster.
Disclosure: Tradeciety is a partner site of Edgewonk.com that offers professional trading journals.