Employees of companies are often subjected to frequent performance appraisals, so why shouldn’t forex traders gauge their own trading performance on a regular basis?
In a corporate environment, the performance appraisal may be conducted by management, the employee’s peers, or even the employee him/herself (a self-assessement). The purpose of the appraisal or performance review, is to give the employee feedback as to how she/he is performing in their designated tasks, to identify potential problem areas and to try to work out ways to improve or maintain performance levels on an ongoing basis.
The forex trader is nearly always a lone soul. What I mean by that, is he/she is basically a self-employed business person, trading to earn income in that business (perhaps as the sole means of income in that business).
Forex traders have a responsibility to themselves to constantly review their own performance, as a trader. Few traders are successful in the long-term if they do NOT keep a tab on their own performance.
How do you check your trading performance? You need to measure it in some way, then revise it in a methodical way. One way to get an overall gauge of your trading performance is to look at the balance of your trading account. If it’s going south – you’re doing something wrong! It would be nice to zoom in on that performance factor a little though, wouldn’t it? Why are you losing money? What specific things are you doing wrong which are causing your trading account to head in the downwards direction?
Companies have a Profit & Loss statement to zoom in on their business performance. It would be unacceptable for them to just make decisions based on their current bank balance – the world would be in a much worse financial state than it’s in now! The Profit & Loss statement allows the company to identify specific areas of their business which are income producing, and where all their expenses lie.
One way you can do a similar thing as a forex trader, is to track every trade you take, and put each trade into different boxes or categories. For instance, one ‘box’ might be the trading strategy you used. Another ‘box’ might be the currency pair you traded, or the day of the week you traded, or the chart time frame you used to make a decision, and so on.
Once you’ve put trades into various boxes, it’s a relatively simple process to go back and analyze your trades by looking at the boxes as a whole. For example … let’s say your trading account lost money over the last month. You remember a couple of bad trades but overall you’re not sure why your account is down so far. You could break this “negative account movement” down into something a bit more specific, such as the trading systems you used during that month. Is your trading balance suffering because of one specific system you’re using? Just look at the boxes to find out.
This is what Trade on Track has been built for (among other things), a Trading Performance Analysis tool. Trade on Track records all the box details for all the trades you take and then provides easy-to-use tools to analyze those boxes at a later date.
To be a truly successful trader, for the long term, you need to constantly gauge and monitor your trading performance. You need to continually make course adjustments when you find problem areas in your trading, or if you find something that’s working really well for you!
Trade on Track and Trade Seriously,
Mark Thomas
Tags: trade analysis, trade performance, trading performance
