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  1. #1
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    Evaluating your trading

    Hi everyone!

    Question that every trader asks himself from time to time can sound like this – «Is my trading good»? In other words, is it robust, does it have the edge, will it be profitable in a long run?

    Some naïve beginner traders say – «it’s very simple, if you earn money, your trading is good, if you lose money, your trading is bad». But it’s not that easy in a world of real trading – good trading does not necessarily correlate with short-term profits, bad trading does not bring profits in short-term perspective.
    Can you tell me – is this trading good or not if I show you distribution of profits/losses in picture below?

    Attachment 10031

    Of course, you may try to analyze this account statement and notice that 906 USD loss was accompanied by increased lot size, also you may notice series of profits (436, 703 and 575 USD), but you know what?

    We never know whether this trading is good or not if we don’t know whether these series of profits was a result of following trading plan or veering from it?
    So, here we come to basic principle of trading – short-term results don’t matter too much, they can be result of luck. Think about it – best trading systems are not providing profit all the time, worst trading systems are not providing losses always.

    Ok, but what if you don’t have rigid trading rules for entering and exiting positions? It’s reality for discretionary traders who use their judgement for making trading decisions.

    Is it really impossible to evaluate your trading using your profits/losses distribution?

    To answer this question, let’s divide trading styles on 2 parts:

    1. Trend-following trading approach:

    In this trading approach, trader expects to have small frequency of winning trades, but his profits are much greater than average loss. For example, it’s ok for trader to have 6-7 or more consecutive losses, then to cover it with 2 trades. His equity curve will look like shown below:

    Attachment 10032

    You see, that in this case trader has relatively small number of winning trades (maybe less than 30%), but he successfully covers his losses with 1-2 «home runs» (big swings). You see, in this trading style it’s not recommended to evaluate trading by short-term profit and we need more time to make conclusion – is this trading approach robust or not.

    2. Short-term trading:

    By short-term trading, I assume that one can either day trade or hold position overnight but still have small duration of average trade (1-2 days). Of course, the less duration of trade we have, the less is our average profit per trade. Yet In this example, we can expect to have better frequency of winning trades. And correlation between good trading and immediate results is much better for short-term trading rather than for trend-following trading or other long term trading styles.

    Equity curve in this case will look like this:

    Attachment 10033

    You see, here we can have about 50/50 distribution – in every second trade we can get profit or at least achieve breakeven point. Why not 70/30 or 80/20?
    That’s a dream of every trader – to have 80% of winning trades and also keep profit/loss ratio more than 2/1 (having average profit greater than average loss).

    But there are no hidden hacks and shortcuts in trading – if we improve our frequency (quantity of winning trades), we lose magnitude (size of our profit becomes smaller). Some traders are proud that they have almost no losses or 95% of winning trades, but size of their possible loss can destroy entire account. Market is hardly predictable in short-term perspective. I personally don’t think that we should chase for high frequency of winning trades. If I will be able to get 50% of winning trades and keep 3/1 profit/loss ratio, I would be in hog heaven.

    In short-term trading approach it's much easier to evaluate your trading by short-term results - the better you trade, the more winning trades you will have and vice versa. That's why personally, I prefer short-term trading approach, because I can keep myself on track and quickly reconginize that my trading has become defensive, too aggressive e t.c.

    Starting from September 2013, my own track record of results is shown below (Every week I put down result in pips in special Excel file):

    Attachment 10034

    You see, my profitable weeks are almost equal to losing ones - I don't have "home runs" except one trade on XAGUSD (Silver). But frequency of winning weeks (I had 2 times greater number of winning vs losing weeks) allows me to survive in the long run (and to get profit) without "killing trades". And, what is even more valuable, I can quickly recongnize when I'm trading poorly and correct my trading behavior.

    Good luck!

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    Last edited by Value trader; 04-21-2014 at 07:13 AM.

  2. #11
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    Quote Originally Posted by shopon View Post
    this is priceless learning yes we need to guarantee that we have a larger number of wins than misfortunes and actually when we are having this more wins we need to likewise guarantee that the misfortunes are not as large as the victors in order to evade them weakening the wins we have made
    Most important things in this business is knowing what you stand as the chance to get in this business, and getting that which you have the chance to get is the main thing of great importance in this business, it is very rare for any traders to trade successfully without real trading evaluation, but never you say anything is guaranteed.

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  3. #12
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    yes now working with the short terms trading with the good projection on completing the differs by the lower modes of focus with the depth of the extent of the analytics by the range of periodes and to keep on the manage on working of the good evaluation with the system of the run to improves of further with the precise of the better entries to work by the future chance on complying the good business.

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  4. #13
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    Good education tools and I am trying to learn it properly. Forex trading needs endless learning process and the more we learn the more we can able to become expert. So, I am waiting for the new topics in this forum so that I can came to learn new things. This topics will help me in increasing my trading skill.

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  5. #14
    Trader Azis Muslim's Avatar
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    Working hard to get better winning streaks is kinda difficult to be done. Sometime we win twice and lose three times and more. Keep evaluating our trading to make our trade better and increase our skills in making decision or analyzing market. We do not know how good our trading strategies unless we feel the result which is good or bad. Every decision must be made with proper analysis and contain no lucky guess or bet the market.

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  6. #15
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    Quote Originally Posted by Jamuna View Post
    Good education tools and I am trying to learn it properly. Forex trading needs endless learning process and the more we learn the more we can able to become expert. So, I am waiting for the new topics in this forum so that I can came to learn new things. This topics will help me in increasing my trading skill.
    I agree with what you say that in learning forex trading is the most important part that should be kept traders do when they want a successful business Dalma is because somehow in this trade we have to work hard in this trade to get our trades with much better learning and training is the path to success that we could get in this business and should continue to improve themselves with skills

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  7. #16
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    Quote Originally Posted by COMANG View Post
    I agree with what you say that in learning forex trading is the most important part that should be kept traders do when they want a successful business Dalma is because somehow in this trade we have to work hard in this trade to get our trades with much better learning and training is the path to success that we could get in this business and should continue to improve themselves with skills
    Regarding this i had two points in my mind first the risk level in this trading business line can be decreased by your knowledge and the experience as more they will be and as low your risk will be second one risk is good factor in this trading business line when a experienced trader take risk that means they are increasing their profit level which is a good thing

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  8. #17
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    always see the both the profits and the loses if you are seen the only the loses and leave the forex then you are not well trader so get the things and makes your life ,i am working hard to be the best ,so many traders are done the well and makes thiers lifes so get the well money in the forex and makes your life style well .

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  9. #18
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    [lang=ar]I am still a beginner in the forex market and there is no level of training at all to me, I am trying to train and a good education and trying to Think my trade in the forex market so far has not reached the stage of professionalism, I really am trying now for training and quality education[/lang]

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  10. #19
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    Quote Originally Posted by zuhaibriaz View Post
    always see the both the profits and the loses if you are seen the only the loses and leave the forex then you are not well trader so get the things and makes your life ,i am working hard to be the best ,so many traders are done the well and makes thiers lifes so get the well money in the forex and makes your life style well .
    yes to work as hard as you can be. to gain of the better with the proper of the technicals by the past work of strategics compliance. and improves the way of life with the stable of constants with the good manage on running the longer of terms with the trading works with the good plan.

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  11. #20
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    As it is, no much trader are doing this, they only trade what they see and anyhow they believe that the business should be traded, but they do not do what is really right in the regard of locating their ways and trace it back whether they can get more improvement, and the particular trade quality they execute.

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