Evaluating your trading. Part 2
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  1. #1
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    Evaluating your trading. Part 2

    Hi trades!

    Let’s continue to talk about trading evaluation. How to understand – is your trading good or not? I have expressed my point of view in previous post on this topic. Core concept from that post is that good trading is not necessarily correlated with quick profits and bad trading is not necessarily correlated with quick losses.

    It’s common psychological thing – to rely too much on short-term results. As Daniel Kahneman (Nobel prize winner) noted, pain from loss is 2.5 times greater than satisfaction from winning trade, that’s why loss aversion is common among traders.

    Also, traders rely too much on historical tests. But nobody really was able to benefit much from optimizing trading systems using historical data. Markets change, and, like Nassim Taleb had said – we should look not only to history, but to the future as well to make proper decisions.
    To really believe that your trading method will work, you should rely on fundamental behavior of the market (I’m not talking about fundamental analysis), on something that will work in future and something that was working in the past.

    What is that?

    It’s human behavior. Market is a human creation, all traders no matter how capitalized they are, are still humans with greed and fear, they try to defend their capitals and afraid to miss big moves.
    In other words, do you have an edge in trading? I’ve been talking about trader’s edge in other arcticle.
    There are 2 types of edges:

    1. Short-term edge
    2. Long-term edge


    The first one occurs when you employ short-term shifts of demand and supply – in other words, you know where traders put their stops, you know where they will overreact and where they will avoid to trade.

    Very simple example of short-term edge is shown below. Majority of traders see resistance line and locate their limit orders along this line and stop above this line. On the other hand, there are breakout traders that will locate their buy stop orders above the line and stops below the line.

    Guess what will happen here?

    tinyedge.png

    Rotation. Market makers will squeeze positions of both long and short traders in this example. The most obvious continuation is rotation – first limit orders of sellers will be executed, then price will go after their stops, in the process executing buy stop orders of breakout traders located above, then price will get back again to execute stops of breakout traders.

    If you know short-term psychology of market participants, you may fade false breakouts and false reversals.
    This is short-term edge. Tiny edge distributed along huge number of trades, will produce long-term profit. Frequency of trades may be high in this case, profits will be relatively small.

    What about long term edge?

    Long term edge is something that you expect to get sometimes, when market will move in some direction for elongated period of time. For that purposes, it’s recommended to pay attention to significant shifts in equilibrium – for example, when price breaks our historical extremes or at least yearly extremes. You have some probability that big money will drive the market away from previous trading range. Of course, you attempts to ride big movement may lead to losses, yet those losses will be relatively small.

    annual.png

    To produce long-term edge, you should have enough tolerance for losses and be ready to deal with frustration most of the time, and profitable trades will be of smaller frequency but significantly greater magnitude.
    By the way – we see possible equilibrium shift on GBPUSD right now – if prices hold higher, we may see good breakout to the upside:

    annual2.png

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    [lang=ar]I do not have a constant level in the forex market, I am still a beginner in the forex market and trying to quality education and training in the forex market and trying for training and quality education and trying to have a successful trading strategy help me to achieve high profits in the forex market[/lang]

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    Quote Originally Posted by Value trader View Post
    It’s human behavior. Market is a human creation, all traders no matter how capitalized they are, are still humans with greed and fear, they try to defend their capitals and afraid to miss big moves.
    yes all trader have their emotional aspect and i too agree with you that the market does not move on its own but it is moved by traders emotions reacting on price and since there are so many of us the reaction tends to occur as the reaction is not by one trader but so many at once and at a specific level/ area

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    evaluating our trading very important because we cannot continue with our bad trade or our mistakes but we must see the result and our analysis and evaluate if it give good result or not because it will be wasting to the time and we cannot lose our money and out time without any progress

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    Evaluating on trade is very good to and very important if we want to make our trade more profitable, this is a kind of controlling system that make our trade will back into a good trade when we make some mistakes, so the faster we improve our mistakes then will be better to making some profit.

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    This is an wise learning tools and trying to get lesson from it. Through this thread came to learn about it and I feel the necessity of evaluate our trading on a regular basis. Trading success/failure depends with our trading skill and thus I am trying to enrich my trading skill through continuous study and practice.

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  7. #7
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    Quote Originally Posted by zuma View Post
    I don't have a consistent level in the forex market, I am still a tenderfoot in the forex market and attempting to quality instruction and preparing in the forex market and striving for preparing and quality training and attempting to have an effective exchanging method help me to accomplish high benefits in the forex market
    trading plans makes the things best if you are able to makes the some good plans then you can change all the thing so get all the things that you want all the taredrs have to working hard that makes the things best i am trying my best to get the some money all the traders have to see the forex as job .

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    this is good infomation about to trading in the forex without facing any loss so on this basis we can get the better result about the forex trading and we can get the sufficient point of the knowing the trend of market to get the good profit in the forex

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    There is nothing better than for the trader to know his statuses a the time he is trading, no matter what you are doing, the true trading of the trader with trend trading skill and the one without the trend trading may cause gambling or not, it is the way the trader take this that will get the trader in the right track.

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    Even though you mention rotation center violation on yearly high but it could work in between a trade location of a rotation center near those highs and we can benefit from it to enter early specially when range is large as in this of gbp/usd you mention but everytime we saw a momentum in rotation center it faded out and in last two weeks we have several attempts but value is still building as price action has large momentum candles . I would thank you for the explanation. Great thread

    regards

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