How To End The Year 2016 And Get Ready For Your Best Trading Year
The time between the years, when markets are quieter and everyone is in holiday mood, this is your best chance to prepare yourself for the new year and get ready to make a real difference in your trading.
The following points show you exactly how to end the year on a high note and how to position yourself for a great new year. “I wish I had been more committed this year and taken trading more seriously” is a phrase that many people will say during this time of the year. Don’t let another year pass by without taking the actions you know will bring you closer to success. We show you how to make the next 365 days count, so that on December 31st 2017 you can look back satisfied and with improved trading results.
Step 1 – Find weaknesses and strengths in your trading – consulting the right metrics
Numbers don’t lie and that’s why we consult the Edgewonk metrics first. But we go much deeper than just looking at your return data and see which direction your equity graph points to. Here are some important metrics from your Edgewonk trading journal and how to interpret them to get new insights about your performance and behavior.
#1 Average Gain, average loss and expectancy
The average gain and average loss already tell you a lot. In your Trade Analytics, add the ordering criteria for Outcome and look at the column “Sum Gain” or Expectancy for winners and losing trades separately.
Here, we first look for major deviations. You can also add another ordering layer for setups and/or instruments to get even better insights. If your metrics are all over the place and you cannot see any consistency, it might signal problems with your position sizing and risk management.
Tip: Apply different filters to the Trade Analytics and find those areas of your trading where you perform worst or where you can spot the largest deviations from the norm. This approach will often also provide new insights into how to create new filters and comments, tags or custom statistics to look deeper into your performance.
#2 The trading emotions – the Tiltmeter
The Tiltmeter visualizes your discipline and your (in)ability to follow your rules. First, take a look at your equity graph and evaluate the green bars you can see in the background – they are the visualization of your Tiltmeter. Ideally, the Tiltmeter should be low; a decreasing Tiltmeter signals that your discipline has improved over time; or, can you see that your equity curve goes down while the Tiltmeter is rising? All those clues can help you find negative trading patterns.
Apply different filters to the equity graph to see how the Tiltmeter changes. Identify those areas where your Tiltmeter is at its highest level and find out when you are performing worst. The filters for entries, exits and trade management come in handy here and they can help you identify your greatest problem areas which you need to work on. Or maybe you find out what works best and then do more of that.
#3 Trading behavior – Trade Management
The Trade Management tab in Edgewonk analyzes your trading behavior, how you execute your trades and (mis)manage your trades in general. Often, traders see that their green potential Trade Management graph is above their red actual performance graph which signals problems in your trade management.
When the green line is above the red line, your potential performance is greater than your actual performance which means that you close trades early or let losers run too long. Let your trades run without interfering with them and you can potentially increase your performance.
#4 Achieving stable account growth – The Edgewonk Simulator
The Edgewonk Simulator takes your current trading performance and simulates the outcome of 500 trades based on your current trading metrics. The Simulator provides insights about your potential account growth, volatility and drawdowns.
Apply different filters to the Simulator and see which types of trades have the greatest volatility (where the swings in the graphs are the largest or where the individual graphs differ the most). Then, either avoid those riskier trades or work on their performance to smooth out your equity curve and to achieve a better growth.
Step 2 – Be honest with yourself. A reality check
Honesty and self-awareness are two of the main attributes of professional traders and high performers. Only if you are honest with yourself, you can identify real challenges and work on what is holding you back. Here are 4 questions that will help you grow as a trader:
#1 Do you journal regularly?
How disciplined are you when it comes to journaling trades? Do you often skip your journaling sessions or do it half-heartedly?
Ask yourself: how much does trading mean to you? How much do you really want to become a professional trader? It takes 2 minutes to enter a trade into Edgewonk. Is it worth spending 2 minutes per trade to turn your trading around? Don’t let another year pass and then tell yourself “I wish I had taken 30 minutes each week to journal all my trades. I would be a much better trader by now.”
#2 Are you still a system-hopper?
When was the last time you have changed your trading method and your whole approach? How often have you changed it in 2016 alone? The professionals know that no system will work right from the start. Pick one system, learn as much as you can about it, consult your Edgewonk journal to find weaknesses and ways to improve it, and then make it work.
#3 Do you listen to your rules?
How disciplined are you? Do you make the same mistakes over and over again? Do you learn from past setbacks or do you keep making the same things?
Most traders don’t learn from their mistakes and they are always operating in the amateur mindset. They break their entry rules, enter trades based on guessing, widen their stop loss, add to losers, take too much risk, change systems every month and gamble with their trading account. They don’t have a trading routine, do not keep a trading plan, don’t perform a pre-market analysis, don’t journal and do not review their past trades.
I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline. – Richard Dennis
Apply some self-awareness and be honest with yourself. Does this describe your approach to trading? We are not here to bring you down; we want to raise awareness about the common problems that keep traders from reaching their full potential. Use the end of the year to evaluate your approach and become clear what you really want.
#4 Did you make progress in 2016?
Most traders try to sugarcoat their trading which keeps them from moving forward. Did your make progress in 2016 or are you just telling it to yourself? Are you continuously losing money? Are you applying the level of professionalism that you need in order to turn this into a trading career? Or are you gambling and hoping to somehow make this work?
We know that the answers to those questions can be painful, but there is no other way to grow and improve. You don’t want to arrive at December, 31st 2017 and still wonder why you are only losing money and not making any.
Step 3 – The right goals and moving forward
Now comes the part where you decide, based on how you answered all previous points, how to make 2017 YOUR year. Here is our top 5 list that will help you reach your goals faster and empower you to make significant progress in 2017.
“This one step – choosing a goal and sticking to it – changes everything.” – Scott Reed
1. Be methodical about your trading
What are the things you have learned about your trading by consulting the Edgewonk metrics? What are your greatest problems and what is costing you the most money? Now, make a list of your 5 biggest performance killers and put it next to your trading desk where you can see them. The change in your trading performance will be significant.
If you don’t know where to start, take a look at our trader development program where we take you by the hand and help you make progress faster.
2. Create a trading routine
The reason why most traders still look like amateurs and beginners, even after years of trading, is because they do not follow a routine and are in reactionary mode. We have talked about the power of following a routine before and you should create your own for the year 2017.
3. Get to know your system like a pro
This is an important point. STOP SYSTEM HOPPING. Your goal for 2017 should be to become the expert in your chosen trading strategy. What is your trading methodology? Are you a trend-follower, do you look for breakouts, do you fade trends or do you trade based on fundamentals? Whatever it is, pick the ONE THING you want to be good at and make it work. The progress you will see if you are really committed and focus on just one thing will be huge.
“Be like a postage stamp— stick to one thing until you get there.” – Gary Keller
4. The Tiltmeter challenge
In our trader development program, the Tiltmeter challenge is the first challenge because we know about the importance and the impact it will have on a trader’s performance. Whatever you do, always try to keep your Tiltmeter as low as possible. Focus on making the best trades possible, detached from the outcome and the money will follow.
5. Be realistic about your expectations
Most traders have unrealistic expectations and dreams when it comes to trading and their own journey which then leads to even worse results and a lot of frustration.
If you can’t make money in trading right now, wouldn’t it be great if you could start becoming a break-even trader in 2017 and be more disciplined about your trading? You don’t need to turn everything around within the next 12 months and once you realize that you are in it for the long game, you can approach trading from a more laid back position. Just focus on making small steps and little improvements within the next few months. Little by little you will get there…
Having wrong expectations and then not seeing the results creates a negative feedback loop.
Now it is up to you. Knowing what to do is typically the easy part – but actually doing it is what separates the professionals from the amateurs. How much do you want to become a better trader? And what are you willing to do for it?
We hope our guide helped you see the things clearer and that you now know how to approach your trading to turn the next 12 months into a period of success, growth and a lot of fun trading the markets.
Your Edgewonk Team