5 Tools And Tips To Optimize Your Trades
Besides the emotional and mindset related features that Edgewonk offers, there are also plenty of order optimization and trade specific features that can help traders improve the way they approach the markets.
In this article, we introduce 5 order specific Edgewonk metrics and show you how to use them to gain new insights into your trading. These metrics have been designed to help traders remove the guesswork and potentially optimize the way they place stop loss orders, take profit orders and manage their trades overall.
Here are the common problems traders have and the questions they ask themselves which can only be answered through detailed record keeping, journaling and performance analysis:
- Can I use smaller stops to increase my reward:risk ratio?
- Should I apply larger stops to avoid stop runs and squeezes and so improve my winrate?
- What about wider profit targets to ride trades longer and profit more?
- Could I use smaller profit targets to avoid price turning ahead of my target?
Answering those questions is not only going to improve a trader’s overall trading method, but it will also help remove uncertainty and questioning which often leads to making wrong assumptions about one’s approach and method.
The Edgewonk metrics that help traders answer those questions are:
Updraw
The Updraw stat measures how close price came to your profit target and is easy to interpret:
An Updraw of below 100% means that price didn’t make it to your profit target; an Updraw of 50% shows that price only came half-way to your target, for example. Here it is especially interesting to filter for losing trades only in Edgewonk. If you see high Updraw values for losses, it means that price moved in your favor a lot and then turned around against you. Maybe you are too optimistic with your targets and by using smaller targets, you can realize more wins and improve your system.
If you see Updraws of higher than 100% for your winning trades, it shows that price would have gone beyond your target and you could have made more by letting the trade run. Maybe you need to work on letting profits run a bit further.
Here it is important that you always track the same amount of time after your trade was closed or you will compare apples with bananas.
Drawdown
The Drawdown is the exact opposite to the Updraw and it measures how close price came to your stop loss.
Again, a stop loss between 0% and below 100% means that price didn’t reach your stop. If you see small Drawdown numbers for winning trades in Edgewonk, it could signal that you set the stops too wide and reduce the reward:risk ratio unnecessarily. Such an easy fix can, potentially, improve the expectancy of a system significantly.
MAE – Maximum Adverse Excursion
The MAE is similar to the Updraw and it shows how much price has moved against you, measured from your point of entry. However, other than the Drawdown, the MAE is an absolute metric and does not set the price move in relation to your stop.
The MAE is typically used to optimize stop loss placement. Usually, a trader would take the average MAE figure, add or subtract a certain points amount to account for current volatility and then place his stop loss accordingly.
MFE – Maximum Favorable Excursion
The MFE is the opposite of the MAE and it shows how much price has moved in your favor in an absolute way, measured from the price of entry.
Again, a trader can use his average MFE, add or subtract points based on current market volatility and then use this value for his profit placement and to get an idea of what to expect from his trades.
Edgewonk’s Alternative Strategies
The Alternative Strategies in Edgewonk are unique and they are a big time saver and can help traders improve or develop a better system much faster.
Most traders always wonder whether a different stop loss, take profit or trade management approach would work better for them. However, so far, there was no easy way to find that out and you’d have to create a new account and start testing it simultaneously.
The Alternative Strategies in Edgewonk speed up the process and you can track the outcome of alternative approaches side by side with your regular strategy. When you enter a new trade in your regular Edgewonk journal, note the outcome for the alternative strategy that you want to test and then let Edgewonk show you what’s the best approach.
Tip: Comparing the incomparable
Conventional trading journals throw all your data together and then provide you with mostly useless data and information.
In Edgewonk, you can set up and track your own trading strategies and methods, you can customize Custom Statistics and personalize tags and so create your very own and completely personalized trading journal experience which then allows you to separately analyze every aspect of your trading and make targeted adjustments with the help of our tools and features.
As you can see, Edgewonk comes with a variety of different tools and features that you can choose from depending on your style, what you feel comfortable with using and based on what you want to achieve. And if you want us to help you make those steps and improve your trading step by step, take a look at our interactive trader development program.