Forex Atr
How To Analyse Your Forex Trading Results
In all the good trading books, it always mentions that you should make detailed records, mainly for yourself, but also for tax purposes. What they never seem to do is go into any detail regarding analysis.
The goal and aim of a profitable trader is to constantly improve himself and make him the best he can possibly be. To do this, you need to analyse your trading results and then take action to constantly improve them!
One of the most misunderstood and not very useful statistics is the ratio of winning trades to losing ones. This is what most people who are not traders, will ask you, thinking that if you win more than 50% of your trades, you must be doing well.
The reason it is not a true reflection of your trading capability is that on average, you may lose eight out of ten trades, but still make money. If your risk and money management are good, and you do do this, you could be losing around 10 pips on each losing trade, but making around 100 pips on each winning trade. Now you can see that an ‘eight out of ten loser’ may actually be considered a good trader!
A better gauge would be to calculate your ‘average winning trade’ (The number of pips / number of winning trades) and conversely, your ‘average losing trade’ (The number of pips / number of losing trades).
If you now subtract the losers result from the winners result, you will see the difference. If this is negative, you are not making money and need to revise your strategy! – This is the most useful and general guide to your trading profitability.
I keep records of my weekly, monthly and annual gains / losses and try to better the results all the time, but a lot of trade analysis does not just involve the total number of trades you have entered.
As a currency trader, the sort of things I look out for are: Which currency pairs do I get the best results from? – This could easily be set up in a spreadsheet, to be calculated automatically. GBPJPY or EURJPY have a large daily movement or ‘ATR’, so they may be the ones that give the best (or worst) trades, depending on your strategy, whereas USDCHF may not move as much and give you relatively better results. Try looking at your results to see any trends.
Another statistic would be: What day of the week is best for me? – Again, I’ve found Fridays tend to be the worst as in the UK afternoon session, as there is a lot of activity closing out positions for the end of the week.
Look at the times of the day that you trade. I’ve found that the mornings are nearly always best for me. Don’t trade in times of little activity.
Look at the time you are in a trade. I generally find as a Swing Trader, is that the longer I am in a trade, the worse the result is! – Check this out for yourself, as this particular statistic can be very revealing!
If you scale in and out of trades, there is always a good opportunity to find out which scaling combinations give the better trades. I will enter with 3 contracts on most trades as this gives me the most flexibility and then close out the contracts one by one as they gain me more pips. The overall results in ‘scaled’ trades are always better than entering with just one contract, giving me more pips per trade. Try seeing how your scaled trades perform with respect to those you don’t scale into or out of.
So for me, the best trades are on Tuesday mornings around 10:00am on EURUSD. Entering with 3 contracts and scaling out!
You may think that any of the above suggestions are all a bit arbitrary, but if you at least do the analysis and act on it, you can only improve your results can’t you?
About the Author
Brett Gossage is a full time Foreign Exchange Trader in London. His new ‘FOREX – Dos and Don’ts’ e-book is ideal for the Forex Beginner at: www.forexdosanddonts.com and his website is at: www.bridgetosuccess.co.uk
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