Applied statistics in your trading. Part 1
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  1. #1
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    Applied statistics in your trading. Part 1

    Hi traders!

    To evolve and succeed we should keep an eye on our trading. There are two ways of doing that. First is keeping a diary, writing down all our thoughts and observations, second is keeping and analyzing your performance.

    Those two approaches for self-observation have limitations and features. In my opinion, they should be applied both.

    For example, if you have just diary, but don’t analyze your statistics, you will definitely «keep your head in the right place», but you will probably unable to recognize some of your biases and misconceptions about your trading. So, in a nutshell – you should keep your head in the right place and have appropriate ideas in your head. In this post we will talk about statistics – what you can capture from your account statement?



    1. Frequency of trades

    If you are increasing number of trades in some market conditions and decrease in other, it can be sign of good trading if you are trading more in more active market and trading less in less active market.
    Let me explain – if you see no action and market goes back and forth with low tempo, whereas you are pushing yourself to make more trades, it probably means that you are too risk-seeking and try to create your own action.

    Look at 2 pictures on the screenshot. The first one shows low tempo and probably sideways market. If trader makes more trades in such environment, it can easily lead to overtrading whereas there’s obvious lack of asymmetrical opportunities there. Of course, there are no rules «set in stone», and you there could be trend before and you can expect a breakout in short-term perspective, but in general, for a daytrader, it looks like self-sabotage.

    The second shows you more volatile environment. Too often traders avoid such market, while this market can provide nice asymmetrical opportunities. If you significantly decrease number of trades in this market, think about «defensive trading» component in your trading. Nobody had earned anything trading defensively – it’s a losing game.

    scr1.jpg



    2. Sequence of winning and losing days

    Sequence of losing and winning days shows you whether you are trading in sync with the market or not. Let me explain. If you have losing streaks, they can indicate that you either experience emotional pressure or have some bias about probability of your trades.

    The most popular thing among traders is a «reversal bias». They try to trade-off reversals, fading solid move. Of course, they may make more trades than usually, because they are afraid of missing out «big move». Often, their stops are also tight, and guess what happens? They enter the market, then exit it with a loss, then enter it again, and it easily lead to overtrading, and in case of strong bias, some traders can go «all in» and get margin call.

    Here is a screenshot of recent EURUSD activity – trader was fading the move all the way and ended with a margin call

    call.jpg

    So, ask yourself – is your losing streak an indication of strong directional bias or increased emotional pressure (when your head is in the wrong place)? Winning streaks indicate effective actions, though – I would say, they show that your bias is realistic and based on good understanding of the market.

    Very important thing is ability to recover from losses. Professional traders have very small drawdowns, because they restructure their thinking after being stopped several times. So, they have skill of re-evaluating their directional biases whereas beginner trader can hold to his bias until margin call.

    change.jpg


    to be continued...

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    This is good learning tools, I read it and came to know about it. I am a beginner and at present learning session. So, all the the elements of learning tools is very effective to me at this moment. But I failed to understand many complicated English manytimes and thus some of them are not able to become easy understanding. It would be better if all the learning tools are narrated with very easy English with examples.

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    This is one of the things that i have noticed about this market trading, it is not all about what you can get by the trdaing skills that you are using, but the plan that you are doing with the trading that you are making too, they are the ones that will hep you to get the money that you actually want in the market, this is the case of the statistical applications too.

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    This is very helpful information, and i have never paid much importance to keeping a dairy or journal and i will now try to do that so my trading can improve. I have experienced both loosing and winning streaks and i would say my winning streak is based on understanding how to properly trade.

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    If we trade more often and opening a lot of position within one day then the chance to getting high accuracy will be smaller since we are not always able to predict market direction. It will be better if we stop for a while and waiting for a better chance to open position. Also if we always trade like that usually we may feel over confident and it may ended with loss. At least that what's happen to me when I did over trade.

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    Quote Originally Posted by cozard007 View Post
    This is one of the things that i have noticed about this market trading, it is not all about what you can get by the trdaing skills that you are using, but the plan that you are doing with the trading that you are making too, they are the ones that will hep you to get the money that you actually want in the market, this is the case of the statistical applications too.
    The trading plan is the essence of the success in the forex market although skills and strategies also play an important role but the trading plan is the basic thing that every trader must have to learn although newbie have to spend the lot time understand the complication of the financial market but when they will get it then they will be expert. So all the newbie must focus on making their trading plan with good strategy and with good management.

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  7. #7
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    This is a good learning system indeed i can say. Trading plan is the secret to make a good profit in Forex although skills and strategies always matters a lot. Applying statistic in trades is also an important thing it ensure that at any moment of time we can weather we have growing our trading business or we care losing in business. Applying statistic will be tough for any new trader but with practice anybody can learn trading with statistic.

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  8. #8
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    well to some extent i buy this idea , but that does not mean you need it all the time before you can start to make money from the Forex market because most times the Forex do not have anything to do with this levels at all so wat we need to focus on is the best trading strategy that we have been using all along.

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    Over trading is always harmful and after series of wins we get over confident of our analysis which leads us to make more trades at the same time with series of losses we want to recover the losses very fast which again turns our trading to over trading and in both the cases we invite losses so we need to trade with proper control and discipline.

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  10. #10
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    Keeping a diary and the analysis of previous trade is really so much important. we can learn from our previous mistakes and also we can analysis our winning condition. we should really concentrate upon our winning and losing streak. if we analysis our losing streak we can find the reason behind it . and by analyze the winning streak we can really know in what condition market and what emotion make me profitable. it is really important.

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