On the one hand, traders are being told over and over again that entries only account for about 10% of your overall trading success and I completely agree with that statement. On the other hand, traders (me included) make lists and lists of weekly analysis with the most interesting setups for the upcoming week.
How’s that for a contradiction?
Don’t get me wrong, I definitely believe that there’s value in my weekly forex outlooks. But if so much of the focus needs to be on trade management and how we exit a trade, why is this a topic much less talked about? Maybe because it’s much harder to talk about trade and exit management than to call a setup? Or maybe because many traders feel uncertain to give away how they actually manage their trades?
Of course, I get that I can’t make a forecast on the exits of trades that still need to happen. What I can do, however, is discuss how some of my past trades (both winners and losers) have worked out and go through the trade and my trading decisions in detail. This way, many of the common concepts such as “cut your losses and let your winners run” might become a bit more tangible and easier to grasp for everyone.
I’ve decided to call this series on trade management and exit management: The Exit.
I’ve learned everything there is to know about trading.
Says no professional trader, ever.
This is something I teach to my trade advisor students every day: not improving is deadly in this business. Seeing your P/L go south kind of deadly.
Every trader who has made it has done so because of continuous learning. A desire to get better at the trading game. Every single one of those traders has a trader development plan. But what exactly is that?
Keeping a chartbook of trades you have taken might seem like such a random thing to do. A nice to have, for traders feeling nostalgic about past trades, maybe. You might’ve heard people talking about it, but I wouldn’t blame you if you didn’t think twice of it and just went on with whatever you were doing.
I’m here to say that such a collection of trade screenshots (sometimes called a playbook or chartbook) is much less trivial. It might even be crucial to your success as a trader.
Let’s try this experiment: do you keep a trading journal? If you answered “yes” here: well done! Now pick a trade from 3 months ago and look at just the numbers. From that data, you can probably see it was a winner of a loser, your R-multiple, stop loss and take profit placement, MFE and MAE and so on.
But without a chart screenshot,
- can you tell what you could’ve done better on this particular trade?
- if you could’ve entered at a better price point?
- exited with more profit?
- if there were chart patterns you missed?
- if that new strategy idea you have would’ve worked out here?
No? That’s where a chartbook comes in. And it’s not even the only benefit of keeping track with chart screenshots.
Since keeping a chartbook, I found it much easier to stick to the good setups and avoid less than optimal setups. I know what to look for, but that visual double check using screenshots of past setups makes all the difference. But let’s first take a step back. What exactly is it?
This article is part of a series. Here are the other parts:
- Part 1: MT4 EA Forex Course: Intro
- Part 2: MT4 EA Forex Course: our first forex expert advisor
- Part 3: MT4 EA Forex Course: trailing stops
- Part 4: MT4 EA Forex Course: buy and sell (current page)
- Part 5: MT4 EA Forex Course: ATR stops and position sizing
Welcome to the fourth part of our MetaTrader4 Expert Advisor course! If you haven’t done so, please have a look at first three instalments.
Up until now, we’ve just been working with buy orders. But we’re traders, not investors! So rather than a buy-only system, it would be nice if our expert advisor could also short the market. In other words, we want to support going both long and short; buy and sell. We’re still working on our Forex Wall-E expert advisor, so let’s continue where we left off!