Currency Trading Tutorial: Increase Your Profits
Currency Trading Tutorial: Increase Your Profits
In this currency trading tutorial we will look at one of the best ways to maximize your profits from the same number of trades. That is, keeping track of your trades.
Most traders are aware of the importance of having a trading plan, but not so many keep a record of their successes and failures. When we start out, it is easy to assume that we will remember all of our trades. In fact, if you think back over just the last week, whether you are using a forex demo account or trading for real, you probably cannot remember more than half of your trades. The big gains and losses stand out but the many small trades that are the backbone of our trading plan quickly fade into a blur. And yet it is these ‘average’ trades that will add up to our success or failure as a trader in the long term.
When things are going well, it is easy to fall into a false sense of security and think that there is no need for any work other than following the trends by placing trades at the right moment. But then if something suddenly changes and we hit a losing streak (as we always eventually will), we have no idea what went wrong.
Was it a fault in our forex trading plan? Was it the way we implemented it? Did we start increasing the risk because of over confidence? Is it a blip in the market that will work itself out in a few days? Or is it just a question of statistics, ironing out the better than expected results that we had over the past few months? Without having a record of our trades to consult, we are completely lost. We have nothing to analyze so we cannot tell whether we should continue with our plan or whether there is something that we should change.
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So what kind of records do we need to keep? It can be something very quick and simple.
You can use either a notebook or an Excel spreadsheet. Just write down every trade that you open, plus of course the close. You will want to note the entry level, stop loss, profit target and actual profit or loss. Also record the reason for opening the trade. And if you deviate from your plan in any way, e.g. by holding on in the hope of a bigger profit than your target or closing early for fear of a loss, write that down too.
If you use more than one system, you will want to record them on separate sheets. If not, you could end up with a situation where you are recording your trades and showing a small profit overall. This is OK so you do not analyze any further. But if you have the different systems on separate pages you might see that one system is performing very well and the other is actually making a small loss. If that continues over a significant time you could hugely increase your profits by putting the losing system on hold while you try to improve it.
Then at the weekend you can look over the previous week’s trades. You may be surprised at what you see. No matter how experienced you are as a forex trader, you will learn something almost every time by following the advice in this currency trading tutorial.
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