Help Please - How can I improve my trading performance?

[Rasi]

Hello All,

My first post :innocent:. I have been lurking for a while reading and learning about trading from experienced professionals in this great forum.

I want to become a successful trader in forex. I have been using a demo account for the last eight months developing my strategies and; to learn from my mistakes. I also opened a live account few four months ago to test my skills with real money. I work full time at present as an accountant and my capital is limited.

Because of my personal circumstances/work, I spend about 1 - 1.5 hrs studying the markets and setting up my orders before I go to work at 8.30 a.m.. I also get email alerts which I am able to react to (where appropriate) during my lunch period. I close all open trades and cancel any unfilled orders by around 6 p.m. when I get home. I also spend time in the evenings studying my trades that day.

My problem seems to be that even though my winning ratio is good for a newbie like me, some of my losses wipe out the good profits I make elsewhere. Last week is typical of the scenario I just mentioned. I entered 20 trades and made money on 12 trades. However, I ended up with a loss for the week of £83 ( or 29 pips). Please see the attached Excel file for further information.

Before I make major surgery to my trading strategy and execution methods, I would like other seasoned professionals here to give me some advice on what I should do to improve my results. My short term target is to make 100 pips profit per week (£500) and in the medium term I want to make 500 pips per week (£2500). Ultimately, I want to be my own boss!.

Many thanks for reading my post and look forward to receiving some advice.

Kind regards,

R.A.S.I

 

[BadgerMatt]

I am still on demo myself, so everything I say should be taken which a big bucketful of salt.

The first thing to say is that if you are winning more trades than you are losing, you may well have the embryo of a succesful trading system. So well done.

The first thing I noticed when looking at your excel spreadsheet is that all of your losses are around the 30 pips mark, which suggests that your stop loss is routinely placed about 30 pips away from your entry. How do you determine your stop? Do you routinely place it an arbitrary number of pips away from your entry or is there a reason for having it in a particular place (e.g. just below a recent low/above a recent high)? What has happened to your trades after your stop is hit? Do they go on to go in your direction? If so, maybe you need to widen your stop (and reduce your position size so as not to increase your risk) and give your trade some more room to breathe.

If we start to focus on money rather than pips, the second thing I notice is that you seem to be routinely risking £180 per trade, and your maximum win is £120. More often than not your gains are significantly less than this. You need to ask yourself why this is. When you enter a trade, do you see a realistic possibility of winning more than £180 i.e. are you risking more than your potential reward? If so, you need to stop this. I have to say I really struggle with the concept of risk/reward ratio because you cannot determine in advance how much you can expect your reward to be with the same level of accuracy as you can with your risk, but you need to take a rudimentary assessment of this. If you are routinely risking £180 for a potential expected reward of less than that then you need a really high "win" ration to compensate for that. If this is the problem you need to take fewer trades, concentrating only on the ones which have a prospect of higher potential reward (If the risk /reward ratio is less than 1:1 - or maybe higher - do not take the trade).

If before you trade you are foreseeing a bigger reward than you end up realising, then the question is why are never realising the full amount? Is it because your predicted reward was never really in prospect (in which case you need to reconsider how you assess your potential reward and take only those trades with a higher potential reward) or is it because you are failing to let your profits run? What are your exit criteria? Obviously I have no idea what trades you have taken, but I am wondering whether part of the reason for your high win ration is that you are getting out of winning trades (or moving a trailing stop too tightly) as soon as you seen them in profit. I may be wrong about this, but from what I have read it seems to be a common problem. It is only natural to want to be right as often as possible and not to want to give back profits so there is a strong temptations to do this, to lock in a winning trade to prevent it becoming a losing one. Unfortunately being "right" can be at the expense of being profitable in the long run. You may need to risk your winning trade turning into a losing one in order to allow room to become more profitable. Have a look at your winning trades. What happened after you got out? Did they continue in your direction afterwards? If so, then that suggests that you are getting out too early. If not, then that suggests that you are taking trades with a risk/reward ratio which is too low.

 

[Rasi]

Thank you very much for your reply. You have some excellent suggestions.

As for my stop losses, they are calculated automatically by the fomula I developed (I use Excel). They tend to range from 15 - 40. However, I have learnt from experience that when the stop losses were lower than 20 they were getting hit. So to make execution easier, I have amended the SL calculation to a minimum of 30.

Secondly, I only enter into trades that have a risk:reward ratio higher than 100% (usually I aim for 125%+). I know there weren't any big wins last week but I do get them occasionally. You are correct in saying though that I have closed some of my winning trades too early. I guess it is partly to do with my restricted trading times (tend to close trades either during my lunch break or in the evenings).

For example, today I set up an order in the morning for a long trade on EUR/USD at 1.3560 with a SL at 1.3531 and limit at 1.3596. The order was filled at 9.24 a.m. and was up 18 pips by 10 a.m. I thought I'll be clever and moved my SL to 1.3541 which turned out to be a big mistake. The revised SL got hit at 11.42 a.m. and the price went down to 1.3540 before racing back up to 1.3685 (125 pips gain from my entry). If I had left the trade alone, I would have made a gain of £180 instead I ended up with a loss of £90. I guess you live and learn.

This week I have made the following changes to my trading strategy:

(1) Reduce the minimum SL from 30 to 29.
(2) Actively manage the stop losses and keep moving them if the trades are in profit (didn't work today though!).
(3) Reduce the risk per trade from £200 (2% of capital) to £150 (1.5% of capital).

Do you think I should do anything else? I will post an update at the weekend to let people know how got on.

Once again, many thanks for your time and reply.

 

[TradeTheEasyWay]

Look Guys, if you are risking your capital you need to have a very specific trade plan which lays out the critiria for entry and exit. Hands up, I do sell courses, but like anything else, if you want to succeed, you need to work at it. I give a lot of free stuff away, a daily vdeo for one. http://screencast.com/t/SK9efkHdeh - this is what a member of our community said
My video is www.youtube.com/thetradermike

Mike