That’s possibly too grand a title but I’ll try to explain where that’s come from based on what I’ve been doing recently to improve my trading skills.
What I’ve been doing is ‘trading’ through a lot of historical EUR/USD price data using Trade-Interceptor‘s great charting package.
You can wind back the clock and do simulated trading for free and their ‘Trading Intelligence’ module records all the results and gives you a summary.
Now for a number of reasons I didn’t do any significant amount of paper trading before I opened a trading account. I was fed the line that ‘demo doesn’t count’ and I wanted to get onto the ‘making money’ bit.
This basically proves what an idiot I am. Yes, from a psychological perspective it’s not the same BUT you can still learn an awful lot about how you see the market and the technical aspects of trading before you even begin to throw money about (or away).
If you’re looking at trading you absolutely need to spend time getting familiar as to how the instrument you’re trying to trade actually moves. You’ll also learn what sort of path your equity curve might follow. Here’s mine after 32 ‘sim’ trades.
Just looking at this graph shows a number of different things.
1) I lost 4 trades in a row there. What was I doing wrong?
2) It goes up!! 😀
Trade Interceptors package also give you a bunch of useful summary data…
Key take home points from this are as follows: –
12 Wins (1159 pts) and 20 losses (418 pts) resulting in +741 pts
11 shorts and 21 longs
Delving a little deeper and using excel I found some interesting underlying challenges.
Holding period for winners was 25% more than for losers. In other words I’m holding winners for about 10 hours and losers about 8 on average.
Maybe cut losers earlier? Anyway, the results data I’ve used for this post is also really old but hopefully you get the point.
Once you’ve traded through this sort of thing look for information you can use. In this ‘run’ 16 of the 20 losing trades I had in EURUSD were longs. That’s a really large amount and goes to show I have a long bias – probably attempting to pick the bottom of a falling market 😉
Anyway – this type of analysis is mandatory in my humble opinion and also (for me) long overdue. I hope this helps illustrate a tiny, tiny, tiny amount of what’s actually required to get better at this skill. Practice!
I wrote this post about 8 weeks ago now and realise the following – having done this a dozen more times…
- I wasn’t structured enough in what I was looking for/trading/trying to understand about the market when I did this exercise
- Be very clear before you start what time-frames/other inputs you’re going to accept
- Your ‘success’ rate should theoretically be higher in live trading because you don’t have access to whatever the sentiment of the market was 29 days ago and so on.
Any new or would be traders out there reading this you need to do a LOT of this type of work and if you decide not to ’cause it’s boring for you and you just want to get to the making money bit then you are a fool… and you know what they say about fools and their money.