As mentioned in previous posts, one of the key element in improving as a trader is to continually monitor the performance over a meaningful number of trades. Grading every 25 trades should help me identify if there are some particular systematic weaknesses that are apparent in my trading. The idea is to measure if I reach a target that gives me a sustainable edge over the long run. The key statistics that define such an edge are the following:
1. Percentage of winning trades: The objective is to achieve a minimum of 60% winning trades.
2. Average win/loss: The objective is to achieve a minimum ratio of 1,5 to 1.
3. 3 biggest wins/3 biggest losses: The objective is to achieve an average of minimum 2 to 1.
4. Biggest win/biggest loss: The objective is to achieve a minimum of 3 to 1.
Nbr. 1 and 2 are given equal weighting (36 out of 100 for each), followed by nbr.3 (16 out of 100) and the lowest weighting for nbr.4 (12 out 100). Anytime I reach the 100 mark over 25 trades, I have achieved my minimum trading objective, anything above indicates that I am on top of my game !!
Once this quantitative evaluation has been completed, I am reviewing each and every one of the 25 trades from my diary with the objective of identifying recurrent patterns, both in my strategy and the execution of the plan. This qualitative analysis should help me to continually look for improvements in my strategy and identify early enough if I need to adapt to changing my game plan. It is, as well, the way to adress recurrent problems regarding the execution of the trading plan and psychological issues that may have occured during the period. With this diagnosis, my aim is to objectively look at the quality of my work and to identify what has to be improved to continue growing as a trader.
Herebelow are the 3 gradings I did sofar since the beginning of the year.
Trades 51 to 75 have been slightly better than the previous 25 but again have not been above the 100 mark, confirming that my trading is still slightly erratic. I have experienced again a serious drawdown during this period (trades 63 to 70). This series of losses has basically been due to the fact that I tried to take signals from a "quicker" timeframe than the usual (using volume-based candles) in order to generate a higher frequency of signals. As soon as I came back to my usual intra-day timeframes, thinks went back to "normal".
Accumulated equity curve since Jan 1st in Rs: