This lesson is dedicated to helping you understand what to do once you are in a trade. Often, traders believe that they ‘have to do something’ when their trade is on and they start moving around stop loss and take profit orders as if they were trying to fight and outsmart the market.
Are you one of those traders who just can’t stop messing around with their trades!? Good, we will now show you how to find out how your actions really impact your performance and what you could be doing to make the difference that really counts.
The “OTP Hit?” field which you’ll see during your trade entry, activates the Trade Management functions in your Edgewonk journal. The underlying algorithms calculate your optimal trade management approach and analyze how your in-trade actions impact your trading performance. Using the OTP field is very easy and you simply have to answer the question:
“did the price hit the target before it would have hit my initial stop-loss price? Regardless of where you actually closed the trade.”
We have a few more examples for clarification:
The potential performance is based on the “set and forget approach”. This means that after a trade has been placed, you don’t touch it again until price either reaches your take profit or stop loss order. Thus, when you see the green graph above the brown graph, you could simply improve your trading if you stop moving around your orders after opening your trade and just let price do its thing.
We use the set and forget approach as a premise because big problem traders have is that they mismanage their trades. By comparing their actual performance to the set and forget approach you can immediately see if what you are doing is the “right” thing.
Edgewonk gives you the confidence to stick with your original trade plan when you see that you just need to trust in your initial analysis.
You can use the filters in the Edgewonk tabs to analyze trade management and its impacts on your performance specifically for different types of trades and thus get a much clearer understanding of your trading behavior. We’ll now show you what to look for.
The Winner/Loser filter
Filter your trades based on the outcome and so analyze winning and losing trades separately.
You should start filtering only for losing trades and see how your trade management graphs look for these kinds of trades. If the green graph is on top of the red graph, you might have just found a way to improve your performance!
With the Position Size filter you can filter your trades and performance based on certain intervals of position size. Try a few different position size filters. Maybe you make more trade management mistakes when your positions are relatively large and the yellow graph is running much higher for trades with a bigger risk because you are not comfortable with risking too much money? You should also combine the Position Size filter with other filters to get a clearer picture about your trading behavior and performance.
The Comments filters for entries, exit and trade management can also provide insights about your trading behavior. Especially when you combine the comments filters with other filters such as Setups, the insights can be more meaningful. You can potentially identify the trades and combinations of setups and specific trade exits where there is still a lot of improvement to be made.
Always keep in mind, when you can identify scenarios where your green graph is on top of your brown graph, all you have to do is simply not to touch your trade again after you have entered it in order to potentially increase your performance.
“It was never my thinking that made the
big money for me, it always was sitting.”
– Jesse Livermore
6 – Trade management