Become a profitable trader Learn How?

07
Jan

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Step by step towards profitable trading – An Edgewonk user journal review

We had the privilege of reviewing one of our user’s edgewonk journal and this journal provides a few interesting learning opportunities and inspiration on how to use edgewonk to work on your trading edge. We will lead you through the journal step by step. You can also watch the video for the full review as well.

 

 

Step 1: Assessing the home screen

We are starting in the home screen to get a first idea of how the trader is doing. This provides information about the experience of the trader and where to start the review. 

In this case, the trader seems to be more or less a breakeven trader. Although in recent trading history, the trader is in a drawdown, most of the time his trading performance has been fluctuating around the break even point. 

This is a great starting point for a journal review because certain parts of his/her trading behavior are already performing well at times. We just need to find out what works well and where he/she is losing money. Then, we can develop a strategy for plugging the leaks. 

 

 

 

Step 2: Losing money through lack of discipline

When we go to the Equity graph (now in the Chart Lab > Equity Graph), we select comments in his Trade Entry filter that describe trades where the trader broke the rules, entered too early, too late and was not adhering his trading plan.

The equity line points down sharply, as we could have expected. The trader is losing quite a bit of money by breaking rules and not following his trading strategy.

We would recommend starting the Tiltmeter Challenge to get into a process-oriented mindset. During the Tiltmeter Challenge, the trader detaches from the outcome of the trade and focuses on the execution. It raises awareness of the overall trade execution and can often change trading behavior quickly. 

 

 

 

Step 3: How much money the trader could have made

In contrast, if we only look at the trades where the trader entered according to the trading plan, the trading performance would have been very profitable.

This should be a huge confidence boost because it shows that when the trader is following the rules, the trading strategy has a positive edge and seems to be profitable. This highlights the importance of a process-oriented approach even further.

 

Step 4: Identifying emotional issues

Now, we will dig into the Trade Analytics. Together with the custom tagging function in Edgewonk, this is one of the most powerful ways how to dissect trading performance and trading behavior.

First, we look at the Psychology comment that this trader has been using. The trader set up comments for trading in a good mood, when he is stressed and for when he feels tired. 

And we can clearly see a correlation between the comments and the trading performance. The trades he took when he felt stressed caused him to lose a lot of money. He lost close to 500 USD on all of those trades. Overall, his whole trading account experienced a loss of 300 USD. So you can see how this is a big deal.

The trades he took when he felt great show a strong positive performance with a 600 USD gain.

Here we have two tips for the trader:

  • At the beginning of the trading day, determine your level of stress. If you feel rushed, experience issues in your daily/family/work life, become aware of those stressors. The trader could then choose to skip this trading day.
  • Alternatively, the trader can develop techniques for coping with stress. Going for a walk, taking a time-out, a workout, reading, listening to music, or meditating could help the trader to reduce the stress.

 

Step 5: Losing money through bad trade management

Micro-management can be an issue for many traders. This trader dedicated a whole Custom Statistic for tracking trade management. 

We ordered the comments for “Sum Gain” so that we can identify outliers immediately. 

The comment “Bad Plan” amounts to a total loss of over 1300 USD. Remember that the current drawdown is just 300 USD. Identifying what is bad about this trading plan could potentially turn this trader into a very successful one. 

Going forward, working on those trades should be the top priority of the trader.

 

When we look at the Trade Management graph, we can see that the green line is above the orange one. This means that the trader is mismanaging his trades and leaving money on the table by actively managing trades. Usually, closing winners too soon and letting losses run for too long causes such a divergence.

 

Step 6: Underperforming trading setups

The trader is also trading many different setups. Although we cannot find any significant outliers as in the previous management comments, we can see that a few setups seem to have particularly large losses.

Being more focused on just a few setups could also help the trader potentially. Especially in the beginning, or when struggling, it is usually better to narrow your system down to just a handful of setups. 

Generally, it is easier to work on a few setups at the same time and it is also less confusing. 

 

 

Conclusion and tips going forward

I would say, this is a typical journal of a trader that is currently struggling but also has a lot of potentials. 

The major focus for this trader should be on his trade management, sticking to the rules and being more disciplined with trading plans. Those seem to be the low hanging fruits that will potentially yield the best results once fixed. 

 

If you do not have a trading journal, you can start with our free trial.

And if you want us to review your trading journal, take a look at our free review service.

 

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