The golden path is somewhere in the middle. What can you do to use previous trades usefully? Here are some ideas.
Forex trading, like anything in which you want to succeed, requires commitment. Casey Stubbs rightfully says that he “would rather work hard and be committed to achieve success then do things halfhearted with no commitment only to be broken hearted again and again by a string of successive failures.”
Indeed, if you are doing things without giving enough thought, you are only in for fun, games and… losses – practically planning to lose. Are you trading only for fun, or do you wish to see profits as well?
So, the other approach is to make serious analysis before each trade and then to evaluate yourself. That’s a great approach – trying to understand what happened. However, some traders dwell upon past trades too much: they either praise themselves and enjoy the glory of a winner, or enjoy the suffering, over and over again. And before the next trade, they are stuck in analysis paralysis.
Where is the middle? Basically, a fruitful analysis is one which results in action items - using the knowledge for the next trade.
Here are some questions you can ask yourself after a winning trade:
- How did I win this trade? Did I trade according to the plan, or did a change in plans make this a winner?
- If the plan was executed accurately and successfully, it’s important to remember exactly what I did and reuse these strengths next time.
- If the plan was altered, did it cause harm and minimize the profit? If so, remember not to repeat this change.
- If the plan was altered and turned the losing trade into a winner, should I incorporate this change into the plan?
For a losing trade, here are potential questions:
- How did I lose the trade?
- Should I have entered the trade at all? If not, try to find how not to enter similar trades in the future.
- Is it one of the trades that the system loses with a favorable risk / reward ratio? If the answer is yes, remember to accept losses.
- Did I change the plan, and this is what caused the loss? If so, remember not to change the plan.
- If the change in the plan minimized the loss, can it be incorporated in the plan?
Here is another question, which is always relevant: How was my emotional reaction during the trade? Is there some strength I should remember for the next trade, or should I try to improve my reactions?
Needless to say, the above questions were only a sample of potential questions for self-evaluation. They all have one thing in common: they are made for action items – they aren’t analysis for the sake of analysis.
Do you look at past trades? If so, how do you it?
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
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