Evaluating Your Trading Performance And Progress
By Terry Leslie
The most obvious sign of performance and progress is a healthy account balance, provided that you are not drawing excessive funds from your bank account to keep your trading balance in check. It is human nature to want to look at healthy figures when you log in, but if all you are doing is pulling from one source to keep another afloat, it can be difficult to determine just how well you are actually doing. In some cases, it can be self deluding.
In order to accurately determine how you are handling the trading world, you need to fund your account and allow it to be self sufficient. If you are continuously dropping more money into it, you are liable to lose track of how much you have invested, how much you have lost, and how much you have gained. If you start an account with $20,000 and you find two months later you are barely scraping by on $5,000 then you have an accurate picture of two things.
First, you need to reevaluate your trading strategy and the information which you are basing you trades on. Second, it shows you very clearly exactly how much money you have lost. The same is true in reverse. If your account balance is down to $10,000 but you have $20,000 out there working for you, then obviously you are doing something right. This simple concept is an at a glance fix. You need to know how to evaluate your win loss ratio.
Honestly evaluating your performance and progress is a hard thing to accomplish without at least a little input from a concrete source. We all want to be successful in any venture we tackle. We often tend to put a mistake out of our mind, after all it was just a little one. Actually, there may have been five or six little ones that we aren't counting. Using a figure to reflect your performance is concrete and irrefutable. There is no way to misinterpret your numbers game.
So, what if you are doing poorly and your numbers aren't reflecting anything positive. Should you quit and go back to your day job? Naturally, this is an option but probably not one that will get you where you want to go. You put in money that you could afford to lose. After all, you are just learning. So instead of getting frustrated and quitting so early in the game, back up and start fresh. Really determine your goals, your strategies, and go get a little more education. Read more, conceptualize more, and make a few more empty trades and see how they might play out.
So, what if you're doing really well? Should you increase your risk tolerance and start playing bigger and better? That is an option. However, this option may not get you where you want to go, either. When you are doing really well, that often tells you that you are doing something right. While risk is part of the game, increasing your risk tolerance too early and by too much might turn your game around, which isn't something that you want.
Understand your win loss ratio. That means you need to know how many dollars you win for every one that you lose. This can only be done well and accurately via concrete information, which what your account balance reflects. Know that when you make a trade that you are going to write down the details, including the set up, the plan you executed, your emotional play, and your level of confidence, how much you executed in real time, not commissions and fees, and the final result.
Some traders leave an addendum space at the end to make a note about what they would do differently. Concrete monitoring is the only form of monitoring that doesn't allow room for self inflated expectations, harsh judgment or yourself, of any type of mind trickery. This one action can mean the difference between scraping it off the bottom and bouncing back and blowing out your account.
About the author
If you would like to immensely improve your trading and investing results, check out www.secrets2trading.com
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