Trader Tip: Trade Execution Analysis If you want to improve your trading by as much as 25% (or perhaps more), this article may be for you. What I would like to discuss is Trade Execution Analysis and how it could improve your trading. Yes, I know talking Trade Plans and Trade Journals, make traders roll their eyes – they are too busy trading. Unfortunately, every profession some times have those “drudgery” tasks that no one likes to do. Trading is no different.
First off, Trade Execution Analysis will be very difficult at best, if you do not have a “reasonable” Trade Plan in place, with their corresponding Trade Journals. Remember a Trade Plan is how you will make a trade (the plan). You should have at least one, but not many – else it will just confuse you and convince you do just about any trade for any reason. Then for each trade you should complete the Trade Journal entry (the actuals). The Blue Point Trading eLearning package goes it much more detail on these topics – it is the core to being a successful trader.
At Blue Point Trading we have already discussed trader statistics (see link below). Very important, but we have a new tool in our new Bluepoints App that takes this Trade Execution Analysis further. Like many in the modern generation, we tend to be visually focused. What would be important for us to see is the Trade Plan side by side the Trade Journal (properly marked) pictorially, to see if the charts presented look the same. Being able to scan the Trade Journal like this will help identify trades that went off plan. In the new Bluepoints App we have just this, along with a subset of the Trade Journal trade details. Please see the adjacent pictorial example of this tool in action.
Scanning pictorially each trade we can begin to see patterns that begin to imprint our thinking – what works and what does not – noting that no Trade Plan is 100% accurate. With a good PSR (Profit Stop Ratio) of 2 to 1, we only need 50% to be accurate. Further search criteria can focus on the winner and losers – along with other Trade Journal attributes. Then the next time we trade, these images will be on your mind to guide one better into the “good” trades. When asked to review trades of a trader, after looking at the trader statistics, this the next thing we look for. If it looks “Helter Skelter,” the trader is merely firing off random trades, and the results will be in line with this approach. Consistency in trading is key. If you are consistent, and are still failing, an adjustment in the Trade Plan is necessary. This is an iterative process, until successful. Remember, few trader are successful, but the successful ones tend to be the same people. This approach could be of considerable help, though it does require work.
When preparing to write this article I scanned through our database of traders to see how the Blue Point Trading traders are recently doing. Perhaps better than average, but still not good enough. Here is what I see:
- Only about 30% of the traders do a Trade Plan.
- Of the Trade Plans I see, only 50% of them I would consider “reasonable.”
- Still just another 50%, complete their Trade Journals.
- About 50% of the Trade Journals are done properly (in the Blue Point Trading methodology – see link below).
Is it no wonder that the statistic that many quote of 80% of traders fail is true?
We started this article by stating that this approach will improve your trading by 25% if you do your Trade Plan and maintain your Trade Journal properly. Even more, if you do the proper Trade Execution Analysis, and then act on it. If nothing else these tasks will help you stop overtrading – something we see a lot. But sadly the old idiom holds true that, “you can bring a horse to water, but you can’t make him drink.” It is up to you to do the “basic” tasks a trader should do, to become that successful proprietary trader. We hope this will provide motivation to start taking our trading profession more seriously (or at least as a trader trainee). Click here, or watch below a video presentation of this Trader Tip.
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