How To Improve The Quality Of Your Journal Data With This Tip
Manual journaling, what we do with the Edgewonk trading journal, offers a variety of benefits and whereas we have mostly talked about the mental aspects of it so far, we want to explain how you can leverage the benefits of your trading journal even further to improve your trade and execution related trading parameters.
Why automatic journaling is not helpful – and can be even dangerous
There are a few different solutions out there where traders can automatically import their broker data and then get a bunch of statistics thrown at them. Although this sounds convenient, such a journaling practice is not helpful and can even be damaging at worst.
Throwing a trader’s trading data together and then trying to boil it down to a few metrics does not provide meaningful results. What ends up happening is that you compare apples with oranges because most traders trade multiple setups or at least different variations of a single setup. When it then comes to performance analysis it is essential that you are able to individually analyze the different components of your trading to make targeted adjustments.
Why separation is essential II
Every setup or trading strategy follows slightly different concepts when it comes to timing entries, setting stops and profit targets, managing trades, exiting trades and even favorable market conditions are different.
When it then comes to performance and trading optimization based on your trading journal’s data, you can see how the variables will be different, and they must be interpreted differently, for the various trading methods.
If you take the 5 different order optimization tools in Edgewonk for example, you will quickly see that optimizing your orders for all your different trading methods at the same time based on a single data point that you have received by adding all your different methods together will not be targeted enough.
This is just one example and Edgewonk offers a variety of different features to improve trading performance which should be applied individually to a trader’s strategies.
How to separate data the right way
There are 3 layers that we recommend separating your trading data by:
#1 The different trading methods
It is an absolute must to separate your trading data by the different trading strategies at the first layer. Tagging each trade based on the trading strategy, the type of setup or the pattern it was based on is important and will already allow you to separately analyze your trades in a more meaningful way.
#2 Setup quality or setup signals
If you have separated your trades based on setup type in step #1, you will quickly realize that not all trades are the same and that there is a need to get more specific.
Especially if you are a technical trader your trading strategies usually have different entry criteria. For example, a reversal trader might have the entry criteria such as:
- Support and resistance is holding
- Indicator divergence
- Pinbar or other price action signal
- Overbought or oversold oscillator
- Higher timeframe direction
However, not all his reversal trades will have all 5 signals at the same time. Some of his trades might only have 4 or even just 3 of the 5 signals. Obviously, the best trades are usually the ones with the most confirmation and confluence. And, all other performance metrics and journaling results will look very differently for the different quality types.
In Edgewonk, we have created the so-called “Custom Statistics” which allow you to create your own data categories and then tag your trades with those descriptions. We highly recommend adding a Custom Statistic in your Edgewonk journal that allows you to either track the quality of the setup or the confluence factors of each trade. This is an easy, yet effective way to improve the data quality of your journaling data.
#3 Getting personal
If you are new to journaling, the first two steps will already improve the quality of your journaling results in a significant way. However, if you want to get into the nitty gritty, Edgewonk can help you with that as well.
Here are a few examples how you can use the Custom Statistics to further separate your trading data:
If you take trades based off different timeframes, tagging your trades with the specific timeframe can help you understand the differences for your trading. You can find out on which timeframes you trade best, where you don’t have an edge or how to improve your strategy based on different timeframes.
- Specific indicators or trading tools
If you just use one indicator, it can pay off to track the different values or patterns on the indicator to see how it impacts your trades. If you, for example, use a MACD, you can note the different values, divergences or changes on the indicator.
If you, for example, trade using support and resistance, you can analyze how price trades into a level, how many times it has ‘touched’ the level and other related factors.
This is advanced performance analysis for the trader who wants to get a much better understanding of his method.
- Market phases
Knowing the setup and the quality of the trade is important but knowing under which conditions the trade took place can make a real difference in the way you can use your journaling data.
For such a Custom Statistic, traders would set up tags such as:
- Range market
- Strong trend
- Low volatility
- High volatility
Once you have started to separate your trading data you can use the different Edgewonk tools and features much more effectively to work on your edge. If you are not sure how to go about this, look at our trader development program where we take you by the hand and help you make targeted adjustments based on your own trading data.
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