Welcome to Module 5 of your trader development course. Congrats on making it this far. This last module will take what you have learned so far and get into the nitty-gritty of performance analysis and trader development.
Over the past lessons, you have learned a lot about your own trading style and habits and how to use Edgewonk to improve specific areas of your trading. This lesson is dedicated to helping you understand what to do once you are in a trade. Often, traders believe that they ‘have to do something’ when their trade is on and they start moving around stop loss and take profit orders as if they were trying to fight and outsmart the market.
Are you one of those traders who just can’t stop messing around with their trades!? Good, we will now show you how to find out how your actions really impact your performance and what you could be doing to make the difference that really counts.
Update: The trade management graph can now be found in the Chart Lab main tab.
Make sure to use the full-screen mode to view in best quality
The prerequisite – The “Original TP Hit” field
The “OTP Hit?” field which you’ll see during your trade entry, activates the Trade Management functions in your Edgewonk journal. The underlying algorithms calculate your optimal trade management approach and analyze how your in-trade actions impact your trading performance. Using the OTP field is very easy and if you haven’t figured it out by now, here is a short video:
Understanding the Trade Management sheet
The 3 graphs: The Trade Management sheet shows 3 different graphs with the following meanings:
|Red graph||Green graph||Yellow graph|
|Your actual performance, measured in R-multiple.||Your potential performance, if you hadn’t touched the trade after entering them.||How much you are gaining or losing through your active trade management decisions.|
Whenever the red graph is at or above the green graph, it signals that your trade management is on point because your actual performance is higher than your potential performance.
However, when the green graph is above the red graph, it means that your potential performance is greater than your actual performance and that you are potentially losing money by making the wrong trade management decisions. Why is this happening?
The set and forget approach
The potential performance is based on the “set and forget approach”. This means that after a trade has been placed, you don’t touch it again until price either reaches your take profit or stop loss order. Thus, when you see the green graph above the red graph, you could simply improve your trading if you stop moving around your orders after opening your trade and just let price do its thing.
We use the set and forget approach as a premise because big problem traders have is that they mismanage their trades. By comparing their actual performance to the set and forget approach you can immediately see if what you are doing is the “right” thing.
Edgewonk gives you the confidence to stick with your original trade plan when you see that you just need to trust in your initial analysis.
Tips for using Edgewonk filters
You can use the filters in the Edgewonk tabs to analyze trade management and its impacts on your performance specifically for different types of trades and thus get a much clearer understanding of your trading behavior. We’ll now show you what to look for.
The Winner/Loser filter
Filter your trades based on the outcome and so analyze winning and losing trades separately.
You should start filtering only for losing trades and see how your trade management graphs look for these kinds of trades. If the green graph is on top of the red graph, you might have just found a way to improve your performance!
With the Position Size filter you can filter your trades and performance based on certain intervals of position size. Try a few different position size filters. Maybe you make more trade management mistakes when your positions are relatively large and the yellow graph is running much higher for trades with a bigger risk because you are not comfortable with risking too much money? You should also combine the Position Size filter with other filters to get a clearer picture about your trading behavior and performance.
The Comments filters for entries, exit and trade management can also provide insights about your trading behavior. Especially when you combine the comments filters with other filters such as Setups, the insights can be more meaningful. You can potentially identify the trades and combinations of setups and specific trade exits where there is still a lot of improvement to be made.
Always keep in mind, when you can identify scenarios where your green graph is on top of your red graph, all you have to do is simply not to touch your trade again after you have entered it in order to potentially increase your performance.
“It was never my thinking that made the
big money for me, it always was sitting.”
– Jesse Livermore