I know this is a bold claim, but it is absolutely true.
It will take me three minutes to show you how but it will take you an hour or two. It will probably be the most worthwhile two hours you spend trading this year.
But do you know what the problem is? You are most likely “too busy” to do the work. But PLEASE remember this, the two hours you spend on this might save you/make you tens of thousands of dollars. I’m sure you could find a couple of hours if someone offered to pay you $10,000 per hour.
How to Radically Improve Your Trading Profits
First, I have done this exercise a number of times and I know from absolute firsthand experience that it has saved me/made me tens of thousands of dollars. So this is not a theory, it is cold, hard reality.
Quickly go back over all of your trades for the last five years. This should take you only a few minutes if you have spread sheeted all of your trades.
If you do not have an accurate record of your trades, changing this ALONE will make/save you a TON of money. You must be able to analyze your past trades. Not being able to do that is:
2. Like being in business and not recording which products are profitable and which are not.
Identify the 10-20 most profitable trades. Go back and analyze in detail what it is about these trades that made them so profitable. Go back and look at the monthly, weekly, daily, 4 hour and 1 hour charts for the exact moment you took the trade.
Look for any filters you use to see if they give an indication that it is a good trade. Filters might include MACD, RSI, Moving Averages, Pivots etc.
If you look carefully enough you will see patterns that enable you to take these highly profitable trades again and again.
Go through all of the trades you have done this year and separate them into the different types of trades you take. Then add up how much profit you made from each type of trade. Your summary might look like this:
Number of Trades Total Profit/Loss
Breaking News 12 -$1,865
Trend Trades 26 $6,122
Counter-Trend Trades 8 $1,207
Hunch Trades 5 -$3,217
Following another Trader 15 $2,589
Tips and Rumors 11 -$2,877
This immediately shows you where you are making and losing money. You can then simply be disciplined and stop doing the losing type of trades and start doing more of the winning trades.
I did this analysis recently and I found out that Forex trades I did on a Monday were almost all losers! Perhaps I was excited after the weekend to take a trade, perhaps Monday’s are a bad day to take trades because of the lack of liquidity in Asian time. I don’t know, but as soon as I found this I emailed my accountability group and committed to them that I would not take any FX trades on a Monday, and I haven’t. This has saved me a lot of money.
1. Spreadsheet all of your trades including:
Day of week and date entered;
Day of week and date exited;
Entry and exit price;
EVERY reason you took the trade;
Profit/Loss on the Trade.
2. Analyze all of your Big Winners and Big Losers.
They leave HUGE clues for you!
3. Don’t just nod your head and go “Yes that would be really useful to do that”.
Actually diary some time in the next three days.
If you need to commit to someone, email me at firstname.lastname@example.org and I will follow up in three days!!!
Yours for Trading Profits,
“Creating the Perfect Trade”
Disclosure: No positions